Ether Can be Both, a Security and a Commodity, Says Former CFTC Chair
- Former Chairman of the CFTC, Dan Berkovitz, believes that ETH can be both a commodity and a security.
- Berkovitz believes that it is legally possible for Ether to fall under the jurisdiction of the SEC as well as the CFTC.
- “The law is clear. Something can actually be both a commodity and a security,” said the former CFTC chair.
- Berkovitz pointed out that commodities,by definition, do not necessarily include physical assets like gold, oil, or metals.
A debate between regulators regarding the classification of the world’s second-largest cryptocurrency, Ether (ETH), has been going on for a long time. While the Chairman of the Securities and Exchange Commission (SEC), Gary Gensler, is convinced that only Bitcoin, (BTC), the crypto coin with the largest market cap, can be considered a commodity, the crypto community argues that ETH also qualifies as a commodity. However, a former Chair of the Commodity Futures Trading Commission (CFTC), Dan Berkovitz, believes that ETH can be both a commodity and a security.
While the classification of crypto assets can be a tiresome job, the regulators in the United States have been battling over ether for quite some time. However, there is no question that Bitcoin can be considered a commodity like gold. Meanwhile, the industry as well as the regulators are divided on ETH.
In an episode of the Unchained podcast on May 23, Berkovitz, who also served as general counsel at the SEC, stated that, as per his beliefs, it is legally possible for Ether to fall under the jurisdiction of the SEC as well as the CFTC. The former is responsible for the regulation of securities in the US, while the latter is responsible for the regulation of commodities.
“The law is clear. Something can actually be both a commodity and a security,” said the former CFTC chair.
Interestingly, on a number of occasions, the CFTC has called Ether, along with some other cryptocurrencies, a commodity, while the SEC is adamant that only Bitcoin deserves to be classified as a commodity. Berkovitz stated that ETH being both might sound confusing to many, but due to the overlapping definitions of a commodity and a security, it is very much possible for an asset to be both.
Berkovitz pointed out that commodities do not necessarily include physical assets like gold, oil, or metals. Essentially, an asset that can be presented in the form of “futures” contracts can be considered as a commodity. This is a reason why the CFTC has the term “futures” in its name.
On the other hand, securities, as defined under the Securities Act and the Exchange Act, can include notes and investment contracts, which can be presented in the form of “futures” contracts. Therefore, the definitions of securities and commodities are overlapping, and hence, Ether can be both, and therefore, ETH can fall under the regulatory purview of both the SEC and the CFTC.
Collin Lloyd, a partner at multinational law firm Sullivan & Cromwell, was also present on the podcast, and as per his belief, it is not possible for “some string of digits that operate on a blockchain” to “natively just be a security.”
“It’s kind of a weird question to be asking, ‘Is this digital asset a security or not?’ I think you should be asking, ‘Is this digital asset being sold as part of a securities transaction?’ That depends on the facts and circumstances,” Lloyd said.
As reported earlier by BitcoinWisdom, Gensler was recently questioned by the Chairman of the House Financial Services Committee, Patrick McHenry, regarding the classification of Ether as a security. However, the SEC Chair was unable to give a clear response, and the members of the crypto community on Twitter praised McHenry for thoroughly questioning the SEC Chair and asked to impeach him and “constrain him from doing further vandalism immediately.”