Why the CFTC Chairman’s Comments About Ether’s Status Are Not That Big a Deal

On Thursday (October 10), Heath Tarbert, the Chairman of the U.S. Commodity Futures Trading Commission (CFTC), stated that it was his belief that "ether is a commodity." However, this does not mean that the U.S. Securities and Exchange Commission (SEC) agrees with this view.

Chairman Tarbert's comments on Ether (ETH) came while he was speaking on stage at Yahoo Finance’s All Markets Summit in New York City on Thursday (October 10).

In particular, the CFTC Chairman stated:

We've been very clear on bitcoin: bitcoin is a commodity. We haven't said anything about ether—until now. It is my view as chairman of the CFTC that ether is a commodity.

Although Yahoo Finance's report on the CFTC Chairman's remarks says that "Tarbert agrees with the SEC’s previous guidance that bitcoin and ether are not securities" and contrary to popular opinion on Crypto Twitter, in fact, the SEC has issued no such official guidance on Ether. 

Most people seem to believe that the SEC has officially declared that Ether (ETH) is not a security based on remarks made by William Hinman, Director of the Division of Corporate Finance at the SEC, at a Yahoo! All Markets Summit event on 14 June 2018:

Based on my understanding of the present state of ether, the ethereum network and its decentralized structure, current offers and sales of ether are not securities transactions.

However, unlike with Bitcoin (BTC), where the SEC and its chairman (Jay Clayton) have on multiple occasions (most recently, earlier this month) reiterated that Bitcoin is not a security, the SEC has on no other occasion made similar declarations about Ether.

In fact, back in June 2018, a spokesperson for Coin Center told CoinDesk that Director Hinman's comments "while instructive, don’t represent a ruling." 

As for Chairman Tarbert's expectation of Ether futures trading on a U.S. crypto derivatives exchange in the near future, although the CFTC might be ready to approve Ether futures contracts, neither Cboe nor CME Group have announced plans for Ether futures even though there have been such rumors as far back as September 2018.

Update at 19:00 UTC on October 10:

About 40 minutes after the original version of this article was published, Preston Byrne, a senior partner at the U.S. law firm Byrne & Storm, P.C., sent out the following tweet:

In the blog post that this tweet links to, Byrne says that he believes that the CFTC Chairman's assessment of Ether is not correct:

I think this view is not correct. An Ether token has less in common with a soybean than it does with a share.

He then goes to say that it is unlikely that the CFTC Chairman would be saying that Ether is a commodity if the SEC has not decided to give Ethereum special treatment. As for why the SEC would choose to look the other way, Byrne says:

"Ethereum’s different 'because reasons,' not because of what the law says. Maybe it got too big. Maybe the harm to investors and crypto businesses that would arise from deeming it an investment contract would have been too great. The only reasons I can divine that Ethereum is treated differently is that the scheme was enormous and multiple major venture capital firms lobbied for this one coin offering to be treated in a particular way that sets it apart from every other coin offering.

And they succeeded, because money talks."

 

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