Is Ethereum both a commodity and a security? Former CFTC Commissioner explains.

Is Ethereum both a commodity and a security? Former CFTC Commissioner explains.

Former CFTC Commissioner suggests that Ethereum’s native token, Ether, could hold dual classification as both a commodity and a security, and may be subject to regulatory oversight by both the CFTC and the SEC.

Previous CFTC Commissioner and ex-SEC General Counsel Dan Berkovitz implies that Ethereum’s native crypto token, Ether (ETH), with a current price of $1,817, could hold dual classification as both a commodity and a security. 

Berkovitz made these remarks within a recent episode of Laura Shin’s Unchained podcast, emphasizing that ETH’s legal status could subject it to the regulatory oversight of both the  United States Commodities Futures Trading Commission and the Securities and Exchange Commission.

Conflicting statements from the CFTC and the SEC have confused Ether’s legal status. The CFTC considers Ether a commodity, while the SEC hasn’t provided a specific category. Reports by Berkovitz, an investment can be both a commodity and a security owing to overlapping definitions. He clarified things aren’t limited to physical items like wheat or oats, and they can deem any investment covered by a futures contract a commodity. This describes the inclusion of “futures” in the CFTC’s name.

Commodity and Security? Previous CFTC Commissioner and Legal Specialists Debate

Reports by Berkovitz, securities, as defined by the Securities Act and the Exchange Act, can likewise be subject to a futures contract, ‌ sliding under the CFTC’s and the SEC’s jurisdiction.

The CFTC primarily regulates futures and swaps on commodities, while the SEC concentrates on securities. Nonetheless, if an investment is considered a commodity by the CFTC and a security under the SEC’s definition, both regulatory bodies can have authority over it.

During the podcast, Collin Lloyd, a partner at Sullivan & Cromwell, criticized the SEC’s assertion that everything except Bitcoin (BTC) should be categorized as a “security” under federal securities law. Lloyd expressed skepticism, stating that no legal precedent shows that a string of digits operating on a blockchain tech can inherently be deemed a security. He suggested that the key question should be whether the digital investment is being sold as part of a securities transaction, which depends on the specific facts and circumstances.

It is worth keeping in mind that Sullivan & Cromwell, as of now involved in the FTX Trading Ltd bankruptcy case, was hired by Coinbase Crypto exchange on April 29 to help the cryptocurrency exchange in its legal dispute with the SEC over ambiguous regulations.

In the meantime, Ethereum (ETH) founder Vitalik Buterin has cautioned against overloading the Ethereum (ETH) network, stating that re-staking initiatives or Layer-1 soft forks could harm the network’s consensus. Buterin supports the dual use of Ether staked by validators, but he opposes using social agreement for layer-2 applications. 

In a recent blog  post, Buterin emphasized the  dangers associated with excessive usage of the Ethereum (ETH) consensus layer, particularly from Layer 2 applications, which could overwhelm the blockchain.

Ethereum (ETH) Faces Selling Pressure Near $1,880, Starts Downward Trend

Ethereum (ETH) recently aimed to break through the resistance zone at $1,850 but encountered selling pressure near $1,880, similar to BTC’s price movement. Consequently, Ethereum (ETH) began a new downward tendency. After reaching a peak of $1,873, the price of Ethereum (ETH) dropped below the level of support of $1,850. 

It likewise breached the 50 percent Fibonacci retracement level of the upward movement from the swing low at $1,792 to the high at $1,873. Ethereum (ETH) is trading below both $1,830 and the 50-day Simple Moving Average. ETH/USD, a bearish tendency line, is taking shape, with resistance forming around $1,840, further contributing to the selling pressure. If the present downward momentum persists, Ethereum’s price could continue to decline, potentially testing the level of support at $1,790.

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