Ex-CFTC Commissioner Calls SEC’s Approach On Ethereum “Illegal”

Former Commodity Futures Trading Commission (CFTC) commissioner Brian Quintenz has criticized the Securities and Exchange Commission (SEC)’s stance on Ethereum (ETH). He labeled the SEC’s approach toward ETH as as “illegal” and raised concerns over potential regulatory confusion.

Ex-CFTC Commissioner Provides Clarity On Ethereum Classification

In a thread on X, Quintenz’s critique spotlighted the SEC’s approval of Ethereum futures ETFs on regulated security exchanges in October 2023. In addition, he emphasized that the SEC’s decision implicitly acknowledged Ethereum’s status as a non-security and outside its jurisdiction. He stated, “When the SEC allowed ETH Futures ETFs to trade on its regulated security exchanges, it explicitly acknowledged the status of the underlying, ETH, as being a non-security and outside of its jurisdiction.”

According to Quintenz, the approval of Ethereum ETFs by the SEC, post Ethereum’s transition to proof-of-stake (PoS) consensus mechanism in September 2022, suggests that the SEC considered Ethereum not to be a security at the time. He argued, “If the SEC had any doubt about the regulatory treatment of ETH in Oct 2023, it wouldn’t have approved the ETF.”

Furthermore, the former CFTC commissioner contended that if Ethereum were deemed a security, the futures contracts listed by the Commodity Futures Trading Commission (CFTC) would be “illegal.” He noted, “If ETH were in fact a security, then the CFTC-listed futures contracts (on which the ETFs were based) would be illegal.” He also asserted, “Moreover, if ETH were a security, then the ETH Futures ETF would be an illegal instrument.”

In addition, Quintenz criticized the SEC for causing “confusion and harming the public” by refusing to acknowledge these facts. He expressed concerns about potential delays or denials of Ethereum ETFs by the SEC, questioning the agency’s justification given its prior acknowledgment of Ethereum’s status as outside its jurisdiction.

The above-mentioned concerns stem from Prometheum’s request to offer custody services for Ethereum as a security. The SEC is yet to make a decision on the matter but it has faced stern contradiction from the CFTC.

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Quintenz Responds To Regulatory Concerns

Moreover, an X user’s concern echoed broader sentiments within the cryptocurrency community regarding the SEC’s approach to regulating digital assets. The user’s inquiry delved into the intricacies of how regulators like the SEC might approach Ethereum’s classification, particularly in relation to its potential as a commodity and a security.

Responding to Quintenz’s post on X, the user questioned, “How would you respond to their argument that it was an acknowledgment of its commodity status (and therefore the legality of a CFTC regulated futures based product), but not the non-security status of the underlying?” Moreover, they also speculated on the SEC’s tactics in court battles and the potential implications for the industry.

In response to this intriguingly question, Quintenz offered a simple yet strong reply. He asserted, “As I showed in the thread, a commodity is deemed to be a non-security if there is a CFTC-regulated futures or swaps contract on it.” Moreover, Quintenz’s response underscored the significance of regulatory oversight.

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