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The ongoing confusion over Ether\u2019s legal status stems in large part from conflicting statements from the CFTC and the SEC. Over the course of the last six months, the CFTC has repeatedly called Ether, along with a number of other cryptocurrencies, a commodity. <\/p>\n
Meanwhile, the Gary Gensler-led SEC hasn\u2019t explicitly provided Ether with a designated legal category. Gensler said at an oversight hearing in April that everything but Bitcoin (BTC) should be deemed a security and has refused to further elaborate.<\/p>\n
While the claim that Ether could be simultaneously a security and commodity may strike many as a contradiction, Berkovitz said that due to the overlapping legal definitions of commodities and securities it\u2019s possible for an asset to be classified as both. <\/p>\n
\u201cThe law is clear. Something can actually be both a commodity and a security.\u201d<\/p><\/blockquote>\n
Berkovitz explained the confusion arises because commodities aren\u2019t purely physical items like \u201cwheat\u201d or \u201coats\u201d and that anything that falls under the purview of a \u201cfutures contract\u201d can technically be defined as a commodity. This explains why the term \u201cfutures\u201d is a part of the name of the CFTC itself. <\/p>\n
Alternatively, Berkovtiz said that a security, which is defined by the Securities Act and the Exchange Act \u2014 and includes things like notes and investment contracts \u2014 can also be the subject of a futures contract, which then places it under the purview of the CFTC as well.<\/p>\n
The CFTC\u2019s main regulatory purview captures the regulation of futures and swaps on commodities, while the SEC solely regulates securities. However, if something is a commodity in the eyes of the CFTC as well as a security under the SEC\u2019s definition, it\u2019s entirely possible for both regulatory bodies to have jurisdiction over it. <\/p>\n
On the podcast, Collin Lloyd, a partner at multinational law firm Sullivan & Cromwell, took aim at the SEC\u2019s claim that everything excluding Bitcoin should be designated a \u201csecurity\u201d status under federal ecurities law. <\/p>\n
\u201cI don\u2019t see anything in the case law that tells me that some string of digits that operates on a blockchain can natively just be a security,\u201d said Lloyd. <\/p>\n
\u201cIt\u2019s kind of a weird question to be asking, \u2018Is this digital asset a security or not?\u2019 I think you should be asking, \u2018Is this digital asset being sold as part of a securities transaction?\u2019 That depends on the facts and circumstances.\u201d<\/p><\/blockquote>\n
Notably, Sullivan & Cromwell is currently working on the FTX bankruptcy case and was hired by Coinbase on April 29 to aid the crypto exchange in its battle over opaque regulation with the SEC.<\/p>\n