Former CFTC Commissioner Identifies ETH as Both Security and Commodity

Updated: 24 May 2023

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Former CFTC Commissioner and ex-SEC General Counsel Dan Berkovitz suggests that Ethereum’s native token, Ether (ETH), with a current price of $1,817, could hold dual classification as both a commodity and a security.

Berkovitz made these remarks during a recent episode of Laura Shin’s Unchained podcast, emphasizing that ETH’s legal status could subject it to the regulatory oversight of both the United States Commodities Futures Trading Commission and the Securities and Exchange Commission.

Conflicting statements from the CFTC and the SEC have confused Ether’s legal status. The CFTC considers Ether a commodity, while the SEC hasn’t provided a specific category. According to Berkovitz, an asset can be both a commodity and a security due to overlapping definitions. He clarified things aren’t limited to physical items like wheat or oats, and they can deem any asset covered by a futures contract a commodity. This explains the inclusion of “futures” in the CFTC’s name.

Commodity and Security? Former CFTC Commissioner and Legal Experts Debate

According to Berkovitz, securities, as defined by the Securities Act and the Exchange Act, can also be subject to a futures contract, ‌falling under the CFTC’s and the SEC’s jurisdiction.

The CFTC primarily regulates futures and swaps on commodities, while the SEC focuses on securities. However, if an asset is considered a commodity by the CFTC and a security under the SEC’s definition, both regulatory bodies can have authority over it.

During the podcast, Collin Lloyd, a partner at Sullivan & Cromwell, criticized the SEC’s assertion that everything except Bitcoin should be categorized as a “security” under federal securities law. Lloyd expressed skepticism, stating that no legal precedent shows that a string of digits operating on a blockchain can inherently be deemed a security. He suggested that the key question should be whether the digital asset is being sold as part of a securities transaction, which depends on the specific facts and circumstances.

It is worth noting that Sullivan & Cromwell, currently involved in the FTX bankruptcy case, was hired by Coinbase on April 29 to assist the crypto exchange in its legal dispute with the SEC over ambiguous regulations.

Meanwhile, Ethereum founder Vitalik Buterin has cautioned against overloading the Ethereum network, stating that re-staking initiatives or Layer-1 soft forks could harm the network’s consensus. Buterin supports the dual use of Ether staked by validators, but he opposes using social agreement for layer-2 applications.

Don't overload Ethereum's consensus:https://t.co/07tzyCrZcJ

— vitalik.eth (@VitalikButerin) May 21, 2023

In a recent blog post, Buterin emphasized the risks associated with excessive usage of the Ethereum consensus layer, particularly from Layer 2 apps, which could overwhelm the blockchain.

ETH Faces Selling Pressure Near $1,880, Starts Downward Trend

Ethereum recently attempted to break through the resistance zone at $1,850 but encountered selling pressure near $1,880, similar to Bitcoin’s price movement. Consequently, ETH began a new downward trend. After reaching a peak of $1,873, the price of Ethereum fell below the support level of $1,850.

It also breached the 50% Fibonacci retracement level of the upward movement from the swing low at $1,792 to the high at $1,873. ETH is trading below both $1,830 and the 50-day Simple Moving Average. ETH/USD, a bearish trend line, is taking shape, with resistance forming around $1,840, further contributing to the selling pressure. If the current downward momentum persists, Ethereum’s price could continue to decline, potentially testing the support level at $1,790.