According to former CFTCC Commissioner Dan Berkovitz, ether might be both a security and a commodity at the same time, falling under the regulatory purview of two federal bodies.
Ethereum’s native Ether token may be both a commodity and a security, the former commissioner of the United States Commodities Futures Trading Commission has claimed.
Dan Berkovitz, who was formerly in charge of legal matters at the Securities and Exchange Commission, indicated that it is feasible for ETH to fall under the purview of both regulatory bodies in a May 23rd episode of Laura Shin’s Unchained podcast.
Conflicting statements from the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) are largely to blame for the continuous ambiguity surrounding Ether’s legal standing. The CFTC has regularly referred to Ether and a number of other cryptocurrencies over the last six months as a commodity.
However, because many people think an asset cannot be both a security and a commodity, this categorisation has given rise to a feeling of contradiction.
Commodity and Security Classifications
Former CFTC commissioner Dan Berkovitz claims that the conflicting legal classifications of commodities and securities are to blame for the confusion. While “wheat” and “oats” are frequently thought of as physical commodities, Berkovitz adds that everything that is covered by a “futures contract” is technically a commodity. This explains the inclusion of the word “futures” in the CFTC’s name.
But Berkovitz also points out that a security, as that term is used in the Securities Act and Exchange Act, can likewise be the object of a futures transaction. As a result, both the SEC and the CFTC may have jurisdiction over an asset designated as a security.
Securities and Futures Contracts
The major regulatory responsibility of the CFTC is to supervise commodity futures and swaps, whereas the SEC only regulates securities. However, when an asset—like Ether—is categorized by the CFTC and the SEC as a security and a commodity, respectively, both regulatory organizations may claim jurisdiction over it.
The conflicting classifications and complicated jurisdictional issues add to the haziness surrounding Ether’s legal standing. Market participants and industry watchers find it difficult to understand the regulatory environment as the CFTC and SEC provide opposing views on how to classify and govern cryptocurrencies like Ether.
The CFTC and the SEC must cooperate and harmonize in order to clear up the ambiguity and create a clear regulatory framework for Ether and other cryptocurrencies.