According to former Commissioner of the Commodities Futures Trading Commission (CFTC) Dan Berkovitz, Ether has the unique characteristic of being classified as both a security and a commodity. This dual categorization places Ether within the regulatory jurisdiction of two federal agencies.
Dan Berkovitz, the former commissioner of the United States Commodities Futures Trading Commission (CFTC) and former general counsel at the Securities and Exchange Commission, has stated that Ethereum's native token, Ether (ETH), has the potential to be classified as both a commodity and a security. During an episode of Laura Shin's Unchained podcast on May 23, Berkovitz explained that legally, ETH could fall under the regulatory scope of both agencies, indicating the possibility of dual jurisdiction.
The current ambiguity surrounding the legal status of Ether can be attributed largely to conflicting statements from the CFTC and the SEC. In the past six months, the CFTC has consistently referred to Ether, as well as several other cryptocurrencies, as commodities.
In the meantime, the Securities and Exchange Commission (SEC) under the leadership of Gary Gensler has not explicitly assigned a specific legal classification to Ether. Gensler stated during an oversight hearing in April that, apart from Bitcoin, everything else should be considered a security. However, he has chosen not to provide further details or clarification on this matter.
Although the notion that Ether can be classified as both a security and a commodity might appear contradictory to some, Berkovitz explained that the intersecting legal definitions of commodities and securities allow for the possibility of an asset being categorized as both simultaneously.
According to Berkovitz, the confusion arises from the fact that commodities are not limited to physical items like "wheat" or "oats," and any asset that falls within the scope of a "futures contract" can technically be considered a commodity. This explains why the term "futures" is included in the name of the CFTC.
On the other hand, Berkovitz explained that a security, as defined by the Securities Act and the Exchange Act, which includes instruments like notes and investment contracts, can also be the subject of a futures contract. This dual classification places it under the regulatory authority of both the CFTC and the SEC.
While the CFTC primarily oversees the regulation of futures and swaps on commodities, the SEC is responsible for regulating securities. However, if an asset is considered a commodity by the CFTC and a security according to the SEC's definition, it is possible for both regulatory bodies to have jurisdiction over it.
During the podcast, Collin Lloyd, a partner at the multinational law firm Sullivan & Cromwell, criticized the SEC's assertion that everything except Bitcoin should be classified as a "security" under federal securities law.
It is worth mentioning that Sullivan & Cromwell, a prominent law firm, is actively involved in the FTX bankruptcy case and was retained by Coinbase on April 29 to assist the cryptocurrency exchange in its ongoing dispute with the SEC regarding unclear regulations.
