According to former Commodities Futures Trading Commission (CFTC) Commissioner Dan Berkovitz, Ether possesses the distinguishing feature of being referred to as both a security and a commodity.

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Diverse Interpretations of the Law

During a recent appearance on a popular podcast on May 23, former Securities and Exchange Commission (SEC) general counsel Dan Berkovitz explained that ETH could fall under the jurisdiction of two regulatory agencies. The legal ambiguity surrounding the status of Ether has been perpetuated by contradictory statements from the CFTC and the SEC.

Ether has been consistently classified as a commodity by the CFTC over the past six months, alongside several other cryptocurrencies. In contrast, the SEC under Gary Gensler has refrained from designating Ether a distinct legal category.

In April, Gensler stated that, with the exception of Bitcoin (BTC), all crypto assets should be deemed securities. To some, the notion that Ether can possess both security and commodity characteristics may appear contradictory.

However, Berkovitz explained that an asset can be classified as both a commodity and a security due to overlapping legal definitions. In addition, Berkovitz emphasized the source of confusion by stating that commodities extend beyond tangible products such as "wheat" and "oats."

He emphasized that anything included in "futures" can be classified as a commodity, thereby clarifying the inclusion of "futures" in the CFTC's very name.

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What Constitutes A Security?

According to the Securities Act and Exchange Act, Berkovitz explained the workings of securities, emphasizing that they comprise various instruments such as notes and investment contracts. Intriguingly, a security can also function as the underlying asset for a futures contract, making it subject to the CFTC's regulatory authority.

This nature of overlap further complicates the categorization of assets. The primary scope of the CFTC's regulatory authority is the oversight of commodity futures and swaps, whereas the SEC focuses solely on the regulation of securities.

In the event that an asset is designated a commodity by the CFTC and a security by the SEC, however, it becomes possible for both regulatory agencies to exercise jurisdiction over it.

During the podcast, Collin Lloyd, a partner at the renowned multinational law firm Sullivan & Cromwell, critiques the SEC's position that all cryptocurrencies, with the exception of Bitcoin, should be classified as "securities" under federal securities law. Sullivan & Cromwell has been active in crypto-related legal matters, particularly the FTX bankruptcy case.

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Coinbase hired the law firm for assistance in traversing the complex regulatory landscape and addressing the challenges posed by the SEC's wells' notice. The crypto community continues to disparage the US regulator's crypto sector policies.