CFTC calls ETH a commodity in Binance suit, highlighting the complexity of classification
The United States Commodity Futures Trading Commission (CFTC) filed suit against Binance on March 27 for violations of the Commodities Exchange Act and CFTC regulations. Those violations included transactions with Ether (ETH), according to the suit. This claim, at first glance, touched on a notable point of contention between the CFTC and the Securities and Exchange Commission (SEC).
The CFTC claimed in its suit that Binance engaged in transactions with “digital assets that are commodities including Bitcoin (BTC), Ether (ETH), and Litecoin (LTC) for persons in the United States.” That was not a new position for the agency. The CFTC claimed ETH was a commodity in its suit against FTX in December and chair Rostin Behnam stated his opinion that ETH and stablecoins were commodities as recently as March 8 in a Senate hearing.
The CFTC position on ETH was fairly uncontroversial before the Ethereum Merge; after Ethereum moved to a proof-of-stake consensus mechanism, SEC chair Gary Gensler commented on staking coins that “From the coin’s perspective […] That’s another indicia that under the Howey test, the investing public is anticipating profits based on the efforts of others.”
Gensler’s comment brought on a slow wave of reactions. In February, for example, Ethereum co-founder and crypto entrepreneur Joseph Lubin told Cointelegraph, “Staking is not a security,” and it would be a “terrible path for the U.S.” to make it so. He added that he thought the U.S. courts would agree with him and “there would be a tremendous outcry from not just the crypto community but different politicians and certain regulators,” if ETH were classified as a security.
Related: CFTC head looks to new Congress for action on crypto regulation
The CFTC
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