Jay Clayton, former chairman of the U.S. Securities and Exchange Commission, believes that crypto tokens may be considered securities today, but may not be in that status in the future.
Clayton’s comments in an interview with CNBC on Friday come as the SEC and CFTC are vying for jurisdiction over crypto assets, which could further confuse industry insiders searching for whether different tokens are securities or commodities.
Current SEC Chairman Gary Gensler said in an interview last year that while he views bitcoin as a commodity, most other crypto assets are securities.
“I agree with Gary Gensler that stocks contain a lot of cryptocurrency,” Clayton told CNBC on Friday.
When asked at a House Financial Services Committee meeting earlier this week whether ether was a security or a commodity, Gensler did not give a definitive answer.
CNBC asked Clayton the same question, and he responded, “Things can go from safe to unsafe.”
Howey Test – named after SEC v. WJ Howe & Co. 1946 in Supreme Court – used to define “investment contract” and thus fall under securities law.
In a speech in 2018, William Hinman, then the SEC’s chief corporate financial officer, said that looking at how a crypto asset is being sold is the best way to tell if it’s a security. No, please note that “current quotes and ETH sales are not securities transactions.”
Clayton seemed to agree with Hinman, saying in an interview Friday that, for example, Broadway tickets received to invest in unproduced plays would be securities. However, tickets purchased years later to see performances will no longer be stock.
“Ether is more of a ticket than a vehicle for raising capital,” he added.
In a lawsuit filed last month, the CFTC accused Binance and CEO Changpeng Zhao of violating exchange and derivatives laws by treating bitcoin, ethereum and litecoin as commodities.
The SEC has been in a multi-year lawsuit with Ripple Labs over whether XRP is a security. Not only that, but regulators have recently targeted Coinbase with Wells’ announcement about alleged potential securities violations.
Coinbase said in a blog post at the time that the company “does not list securities.”
According to Clayton:
“The courts are not an efficient place to deal with the classification of securities, commodities, etc.
Right now, we’re having trouble getting… technology into the traditional financial system. That’s what we should be focusing on. “
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According to Blockworks