Dan Berkovitz believes that Ether can be both a security and a commodity. As a result, it could fall under the jurisdictions of two independent regulatory entities. This situation sheds new light on the cryptocurrency market.
Ether a commodity and a security
Is Ether a commodity or a security? The answer to this question is still unclear, and former commissioner of the U.S. Commodity Futures Trading Commission, Dan Berkovitz, shared his thoughts on the subject in the latest episode of the Unchained podcast, hosted by Laura Shin.
Berkovitz, who previously served as legal counsel to the Securities and Exchange Commission, says there is a possibility that Ether could fall under the jurisdiction of both regulatory agencies. This complex legal situation consists of contradictory statements from the CFTC and the SEC, which create confusion and uncertainty among investors.
The Commodity Futures Trading Commission (CFTC) has repeatedly referred to Ether, along with other cryptocurrencies, as a commodity in recent months. However, the Securities and Exchange Commission (SEC), headed by Gary Gensler, has not assigned a clear legal category to Ether. Gensler, in an oversight hearing in April, said that all cryptocurrencies, with the exception of Bitcoin (BTC), should be treated as securities. However, he declined to provide further clarification.
No exclusion at the definition level
“The law is clear. In fact, something can be both a commodity and a security.” – Berkovitz stresses, pointing to the existence of ambiguities and dependencies between the concepts of commodities and securities.
The former commissioner explains that the confusion stems from the fact that commodities are not just physical objects, such as wheat or oats. Anything subject to futures contracts can technically be defined as a commodity. That’s why the term “futures” is integral to the name of the U.S. Commodity Futures Trading Commission (CFTC).
On the other hand, Berkovitz points out that a security, as defined by the Securities and Exchange Acts, includes banknotes and investment contracts. It is these securities that can be subject to futures contracts, which are under the CFTC’s supervision.
Ether creates uncertainty for much of the market
In this maze of definitions and regulations, Ethereum is at an unusual crossroads. Its hybrid nature means that it can be interpreted in different ways, becoming both a commodity and a security. This multidimensionality of Ethereum opens the door to new perspectives and challenges that must be resolved in order to establish a clear legal category for this all-important digital asset.