CFTC Chair says ethereum is a commodity

Rostin Behnam told the Senate Agriculture Committee on Wednesday that Ethereum is a commodity

The chairman of the Commodities and Futures Trading Commission (CFTC) has taken a strong stance against the Security and Exchange Commission (SEC)’s subtle power creep over the digital asset market.

Rostin Behnam told the Senate Agriculture Committee on Wednesday that Ethereum, the second-biggest crypto currency after Bitcoin, is a commodity.

It has been listed on Commodities and Futures Trading Commission exchanges for quite some time, and for that reason, said Behnam, who contended that it creates a ‘direct jurisdictional hook’ for the agency to regulate ethereum’s derivatives market as well as the underlying market.

His opinion seems to directly contradict that of Security and Exchange Commission chairman Gary Gensler, who contended last month that ‘everything other than Bitcoin’ comes under securities laws. While not naming one, the chairman has signalled several times that this would include Ethereum—mainly after the network shifted to a proof of stake consensus mechanism.

Under the Howey Test, a security is an asset sold to raise money from the public, from which they anticipate profits based on the efforts of others. Gensler’s own words supported this in January last year. Though, under the securities act, the definition can be much wider.

Comments in late November indicated that Behnam had come to agree with the Security and Exchange Commission chief that Ethereum comes under this umbrella, but his reasoning Wednesday shows that he is abiding by his long-standing stance that there is scope for more than one crypto commodity.

We would not have permitted the Ether futures product to be listed on a Commodities and Futures Trading Commission exchange if we did not feel firmly that it was a commodity asset, he explained, saying that his agency has ‘serious legal defences’ to back their case.

The regulatory chiefs also differ on stablecoins. While the Security and Exchange Commission recently threatened to sue Paxos for issuing BUSD as an unregistered security, Behnam thinks stablecoins should be treated as commodities—absent any legislation to claim otherwise.

Behnam cited an investigation into Tether during a lawsuit in 2021, after which Tether agreed to pay more than $40 million to settle charges that it had lied about its dollar reserves.

Investigating the situations around the Tether case, it was clear to our enforcement team and the commission that the Tether stablecoin was a commodity, and that we required to move ahead, and quickly, to police that market, he said.