SEC Chair Challenges CFTC’s Claims of Ether As A Commodity, Says All PoS Tokens Are Securities

On Wednesday, March 15, chairman of the US securities and Exchange Commission (SEC) - Gary Gensler - stated that all Proof-of-Stake tokens shall qualify as securities under the US securities laws.

Protocols running the Proof-of-Stake tokens allow the coin holders to earn financial rewards while allowing some of their tokens to be used in ordering transactions. The SEC chair argued that the creators of the PoS protocol promote their projects on social media thereby attracting a huge pool of investors who come with the expectation of earning returns.

During an open meeting of the SEC on Wednesday, Gary Gensler said: "The investing public is investing anticipating a return, anticipating something on these tokens, whether they're proof-of-stake tokens, where they're also looking to get returns on those proof-of-stake tokens and getting 2%, 4%, 18% returns. Whatever they're promoting and putting into a protocol, and locking up their tokens in a protocol, a protocol that's often a small group of entrepreneurs and developers are developing, I would just suggest that each of these token operators ... seek to come into compliance, and the same with the intermediaries." 

Gensler’s recent comments put the SEC at the odds of CFTC striking a new debate between the two regulators over who gets jurisdictional rights over Ethereum. Last year, the Ethereum blockchain transitioned form the Proof-of-Work to the Proof-of-Stake network.

A week back, the derivatives regulator - US Commodities and Futures Trading Commission (CFTC) - stated that the second-largest cryptocurrency Ethereum (ETH) should come under their regulation.

CFTC Chair Rostin Behnam said that “It’s (Ethereum) been listed on CFTC exchanges for quite some time, and for that reason,” and thus it creates a “direct jurisdictional hook” for the agency to look after ETH’s derivative market as well as the underlying market.

Now, the recent comments from Gary Gensler puts the two topmost US regulators at odds with each other. On the other hand, the US Congress has yet to come with a proper regulatory policy on dealing with digital assets.

On Wednesday, Gensler was asked his views on the CFTC’s stand to treat Ethereum as a commodity. Responding to it, Genlser said: “I’m not going to comment on any one token. As to regards to the Commodity Futures Trading Commission, I love it.”

But the SEC is not the only agency willing to treat Ethereum as a security. Last week the NYDFS slapped a lawsuit on crypto exchange KuCoin for offering staking products that allowed users to earn passive income. Commenting on it, New York Attorney General Letitia James said Ether is a security.