Former CFTC commissioner Brian Quintenz condemned the SEC’s conduct as “illegal” regarding Ethereum.
Brian Quintenz, a former commissioner of the Commodity Futures Trading Commission (CFTC), has faulted the Securities and Exchange Commission’s (SEC) position on Ethereum (ETH).
He characterized the SEC’s stance on ETH as “illegal” and raised concerns regarding the possibility of regulatory ambiguity.
Former CFTC Commissioner Clarifies Ethereum Classification
The SEC’s October 2023 authorization of Ethereum futures ETFs on regulated security exchanges was the subject of Quintenz’s critique in a thread on X.
In addition, he emphasized that Ethereum’s classification as a non-security and the exclusion of the SEC’s jurisdiction was implicitly acknowledged in its decision.
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.”
The SEC’s approval of Ethereum ETFs after Ethereum’s transition to proof-of-stake (PoS) consensus mechanism in September 2022 indicates that the SEC did not classify Ethereum as a security at that moment, according to Quintenz.
He argued, “If the SEC had any doubt about the regulatory treatment of ETH in Oct 2023, it wouldn’t have approved the ETF.”
Moreover, the former CFTC commissioner argued that considering Ethereum as a security would render “illegal” the futures contracts that the CFTC lists.
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.”
Moreover, Quintenz criticized the SEC’s refusal to acknowledge these facts as “confusion and harming the public.”
Concerned about the possibility that the SEC would delay or deny Ethereum ETFs, he questioned the agency’s rationale in light of its prior admission that Ethereum is a subject outside its jurisdiction.
Meanwhile, Prometheum’s request to provide custody services for Ethereum as a security gives rise to the previously mentioned concerns.
The SEC has not yet rendered a decision on the subject, but the CFTC has issued a stern rebuttal.
Quintenz Addresses Regulatory Concerns
Furthermore, the concern expressed by an X user mirrored wider sentiments prevalent in the cryptocurrency community concerning the regulatory approach of the SEC towards digital assets.
The user’s inquiry explored the complexities surrounding the classification of Ethereum by regulatory bodies such as the SEC, specifically concerning its potential as both a commodity and a security.
In reply to Quintenz’s X post, the user inquired, 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?”
Furthermore, they engaged in conjecture regarding the strategies employed by the SEC in litigation and the possible ramifications for the sector.
In light of this thought-provoking inquiry, Quintenz provided a concise yet effective response.
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.”
Furthermore, Quintenz’s reply emphasized the criticality of regulatory oversight.
