Once again, in the debate over Ethereum’s classification, Securities and Exchange Commission Chair Gary Gensler raised concerns about the potential classification of tokens using staking protocols as securities under U.S. law in a recent interview on March 15th.
Speaking to reporters, Gensler suggested that the returns seen by token holders from staking indicated that these tokens are securities and would need to be registered as such.
Gensle has indicated that he considers Ethereum to be a security, in contrast to the view expressed by the Chair of the Commodity Futures Trading Commission (CFTC), Rostin Behnam, last week in a March 8th interview, who consistently referred to Ethereum as a commodity.
Speaking to reporters, Behnam defended his position by pointing to the fact that the CFTC has already regulated ETH derivatives, which he argues would not have been possible if ETH were considered a security.
Meanwhile, the SEC has not formally declared whether Ethereum is a non-security asset. The agency’s Director of Corporation Finance, Bill Hinman, stated in 2018 that he viewed the Ethereum network at that point as “decentralized” to the extent that “current offers and sales of Ether are not securities transactions,” according to Behnam’s statement.
However, Gensler took over the SEC in 2021, and his views on ETH may differ from those of his predecessor. Nevertheless, the differing perspectives of the two regulatory agencies could potentially lead to complications in the future.
Diverging Views On Ethereum Classification
Gensler spoke with reporters after the commission voted to advance three proposed rules aimed at tightening cybersecurity, consumer privacy, and system standards for the securities industry.
During the interview, Gensler stated that the investing public is anticipating a return on their investment with these tokens, including proof-of-stake tokens.
He added that these investors are looking to receive returns of 2%, 4%, or even 18% on their investments. Gensler urged all token operators to seek compliance and for intermediaries to do the same.
Gensler’s comments come after the SEC’s first staking-as-a-service enforcement action, which settled with Kraken last month.
Additionally, in a lawsuit filed by New York Attorney General Letitia James against crypto company KuCoin, it was argued that Ethereum is an unregistered security.
However, as the SEC continues to scrutinize the crypto industry, Gensler’s remarks indicate that staking protocols may be the next target of regulation.
Token operators and intermediaries should take heed of Gensler’s suggestions and take steps to comply with US securities law to avoid potential enforcement actions in the future.