Ethereum: CFTC Chair Says Agency Working With Gensler On Whether ETH is a Security

In a recent Congress testimony, CFTC Chair Rostin Behnam revealed that his agency is working with the SEC to provide regulatory clarity for Ethereum (ETH).

The status of ETH has been the subject of much speculation throughout the years. While the Commodity and Futures Trading Commission (CFTC) has ruled that ETH is a commodity, the SEC does not have a clearly defined stance.

CFTC Chair Rostin Behnam spoke on the ETH subject in a recent Congressional hearing, reiterating that his agency views cryptocurrency as a commodity. This stance means that the CFTC should regulate entities offering ETH-related trading products, a role that the agency has played until now.

However, Prometheum, a crypto-focused company that plans to launch a trading desk and custodial product, has been at the center of much controversy.

Prometheum has secured a special purpose broker-dealer license created by the SEC and issued through the Financial Industry Regulatory Authority (FINRA), which the SEC oversees.

Being regulated by FINRA and the SEC, Prometheum claims compliance with U.S. securities law, an obligation that most crypto startups, including Coinbase, Binance, and Kraken, have pushed against because of its enormous implications for the nascent industry. 

As it is under securities laws, Prometheum automatically suggests that assets listed on its platform are securities. The firm has further pushed its controversial agenda by claiming that it will list Ether (ETH) as its first cryptocurrency, beginning with custodial services.

The planned launch could mean that ETH becomes a security under the U.S. securities laws or create a scenario where the SEC officially reveals its stance on whether Ethereum is a security or not.

Ahead of such potential revelation, CFTC’s Chairman Rostin Behnam has warned of the implications it would have on the U.S. financial markets.

Redesignation Will Create More Regulatory Hurdles, CFTC Chair

Appearing before the House Committee on Agriculture on Wednesday, Chairman Rostin Behnam told lawmakers that any action by the SEC to declare ETH as a security will have huge implications.

Among them, it will put registrants and traditional exchanges where users trade Ether-related products under the purview of the CFTC as non-compliant and require them to adopt the SEC’s requirements.

To avoid such potential loggerheads with the SEC, the CFTC Chair confirmed that both agencies are working together.

He remarked:

“I am working with Chair Gensler; we are working with his office; we are working with the agency to ensure that whatever steps are taken are deliberate. That we are involved and that they understand certainly what the consequences will be if there was a decision by the agency to determine that Ether was a security.”

🚨NEW: CFTC Chairman @CFTCbehnam testified in front of the @HouseAgGOP that his agency is working closely with @GaryGensler and the @SECGov on the classification of $ETH as a possible security as @PrometheumInc plans to custody $ETH on its platform.

Behnam says a decision by… pic.twitter.com/PEOX9RBuAW

— Eleanor Terrett (@EleanorTerrett) March 7, 2024

In the meantime, the CFTC Chair emphasized that both agencies must focus on preserving the integrity of the U.S. financial markets and understand that the decision to classify ETH as a commodity has worked for years.

He added that the markets are functioning well “under the decision and conclusion that Ether is a commodity.”

It remains to be seen whether the SEC will proceed with pushing for the redesignation of ETH as a security. Nonetheless, Chairman Rostin Behnam’s recent comments confirm the SEC could be tilting in that direction.