Former CFTC commissioner claims commodities encompass more than just tangible items like "wheat" or "oats."
Dan Berkovitz, the former commissioner of the United States Commodities Futures Trading Commission (CFTC), has proposed that Ethereum's native Ether (ETH) token can be classified as a commodity and a security.
Berkovitz shared his perspective during a recent episode of Laura Shin's Unchained podcast, shedding light on the possibility of ETH falling under the jurisdiction of both the CFTC and the Securities and Exchange Commission (SEC).
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The ambiguity arises from divergent statements made by these two regulatory entities over the past six months.
The CFTC has consistently labeled Ether and several other cryptocurrencies as commodities. On the other hand, the SEC, under the leadership of Gary Gensler, has refrained from explicitly assigning a specific legal categorization to Ether, apart from Bitcoin (BTC), which Gensler deems a security.
While some may perceive the notion of Ether being both a security and a commodity as contradictory, Berkovitz contends that due to the overlapping definitions within legal frameworks, such a dual classification is plausible.
The law is clear. Something can actually be both a commodity and a security.
According to him, commodities encompass more than just tangible items like "wheat" or "oats." Anything falling within the scope of a "futures contract" can be regarded as a commodity. This aligns with the very name of the CFTC, which includes the term "futures."
Furthermore, Berkovitz argues that securities, as defined by the Securities Act and the Exchange Act, which encompass notes and investment contracts, can also serve as the subject of futures contracts.
Consequently, such assets can be subject to the jurisdiction of both the CFTC and the SEC. This intricate legal landscape contributes to the perplexing status of Ether, arousing further debate and scrutiny.
Collin Lloyd, a partner at Sullivan & Cromwell, a prominent multinational law firm, joined the discussion on the podcast, criticizing the SEC's position that anything other than Bitcoin should be classified as a "security" under federal securities law.
Lloyd challenges the notion that a string of digits operating on a blockchain can inherently be considered a security, emphasizing the importance of evaluating whether a digital asset is being sold as part of a securities transaction.
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.
The complex interplay of legal definitions and the potential dual jurisdiction of regulatory bodies heighten the importance of establishing a clear framework for categorizing digital assets. The industry watches closely as legal experts actively engage in shaping the future of cryptocurrency regulation, ensuring that innovation and investor protection go hand in hand.