U.S. Securities and Exchange (SEC) Chair Gary Gensler repeatedly dodged the question on whether Ethereum is a security or a commodity.
In an April 18 hearing before the House Financial Services Committee, Gensler was questioned by the Committee’s chair Patrick McHenry on his stance on the second-largest cryptocurrency by market cap.
McHenry referenced prior statements made by former Director of the SEC’s Corporate Finance Division Bill Hinman that ETH was not a security (which would make it a commodity), and statements last month from the CFTC Chair Rostin Benham that ETH was a commodity against a contradictory one by NYAG Letitia James that ETH was a security.
“Clearly an asset cannot be both a commodity and a security. Do you agree?” McHenry asked Gensler.
“Actually, all securities are commodities under the Commodity Exchange Act. It’s that we are excluded commodities. But I would agree that a security cannot be also an excluded commodity and an included commodity,” Gensler responded.
McHenry then asked Gensler to make an assessment, under the laws that exist today, to categorize Ether as either a commodity or a security.
“You’ve repeatedly said you’re not going to speak to one, except you’ve spoken to one: Bitcoin. So I’m asking you to speak to the second-largest [cryptocurrency] by market cap here,” McHenry said.
Gensler alluded to the “ten to twelve thousand” tokens that exist today, seemingly intending to make a point about a group of entrepreneurs that launch a token with the intent of making a profit, but McHenry pressed him to specifically answer the question he posed.
When Gensler attempted to avoid giving a direct answer again, saying he did not want to “pre-judge” on the subject, McHenry pointed out that he had in fact done so by bringing 50 enforcement actions against crypto firms.
“We’re finding out as we go, as you file suit, as people get Wells notices, on what is a security in your view, in your agency’s view,” said McHenry.
In March, The Block reported that Gensler suggested that Proof-of-Stake tokens, a category that Ethereum now falls under, are securities. In his view, the concept of users locking up tokens in a protocol with the anticipation of profit would put those token operators under the purview of the agency.