Rostin Benham, Chairman of the Commodities and Futures Trading Commission (CFTC) has taken a stand against the U.S. Securities and Exchange Commission (SEC) and its attempts to regulate the crypto industry. On March 8, while speaking to the Senate Agriculture Committee, he called Ethereum, the world’s second-biggest virtual currency after BTC, a commodity.
“It’s been listed on CFTC exchanges for quite some time, and for that reason, it creates a very direct jurisdictional hook for us to police obviously the derivatives market but also the underlying market as well,” commented Behnam.
His statement is contradictory to the opinion of Gary Gensler, chairman of the SEC. In February, the latter reiterated that although Bitcoin is a commodity, everything other than Bitcoin should be considered a security. He has repeatedly hinted that the activities of Ethereum-related companies would be analyzed — especially after the network’s long-awaited switch to proof-of-stake.
Ethereum’s problems with the Howey Test
According to the Howey Test, an asset can be classified as a security if there is an investment of money in an enterprise and the expectation of profits derived from the efforts of others. Gensler confirmed his understanding of this definition in January 2022. However, according to the Securities Act, this definition can actually be broader.
Initially, Behnam agreed with Gary Gensler that only Bitcoin should be considered a commodity, but last week he seemed to have returned to his earlier opinion that Ether can also qualify to be a crypto commodity.
“We would not have allowed the Ether futures product to be listed on a CFTC exchange if we did not feel strongly that it was a commodity asset,” he commented, adding that his organization has “serious legal defences” to believe in that.
The heads of two regulatory authorities also hold differing opinions on stablecoins. The SEC has threatened lawsuit against Paxos over the issue of BUSD as an unregistered security. The CFTC head claims that a stablecoin should also be considered a commodity, unless proved otherwise by law.
He has also referred to an investigation into Tether, a stablecoin issuer that was accused of lying that its digital tokens were fully backed by fiat currencies. The company eventually agreed to pay over $40 million in settlement.
“Examining the circumstances around the Tether case, it was clear to our enforcement team and the commission that the Tether stablecoin was a commodity, and that we needed to move forward, and swiftly, to police that market,” he commented.
If digital currencies, including Ethereum, are classified as a commodity, this will result in significant changes to the regulation system, making it more targeted and stable.
