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Earlier this week, US authorities declared that Ether is a commodity not a security. Now, other US authorities are claiming Ether is a security and are thus suing KuCoin Exchange.
On Wednesday, Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam spoke at the Senate Agriculture committee hearing, stating that Ether and stablecoins should be treated as commodities.
He added that as these assets are commodities, they should be overseen by the CFTC; a view held by the body in its complaint against FTX founder Sam Bankman-Fried in December.
Read more: Sorry SEC, Stablecoins Are Commodities According to CFTC
The view opposes that of Securities and Exchange Commission (SEC) Chair Gary Gensler, who has been considering whether the assets are securities. He argued that Ether's move to proof-of-stake shifts it to being a security.
Just one day after the CFTC's declaration, New York Attorney General (NYAG) Letitia James claimed that ETH is a security.
According to a press release, James filed a lawsuit against KuCoin exchange for “failing to register as a securities and commodities broker-dealer and falsely representing itself as an exchange.”
The release explained that the Office of the Attorney General (OAG) was able to trade crypto on KuCoin even though the company is not registered in New York state.
"The action is one of the first times a regulator is claiming in court that ETH, one of the largest cryptocurrencies available, is a security," the release stated.
Coinbase, Kraken, Bittrex, and Bitfinex are all registered with the state of New York.
NYAG argues that ETH is a speculative asset like LUNA because it relies on "efforts of third-party developers in order to provide profit." therefore, KuCoin was required to register before selling ETH, LUNA, or UST.
Mixed messages
The conflicting stance of US authorities on whether cryptocurrencies are commodities or securities has throttled the crypto industry.
Binance has been under the SEC's microscope as of recent. Towards the end of last month, Paxos announced it was ending its relationship with Binance, following scrutiny from US authorities (although Paxos claimed the move was unrelated).
Read more: Paxos Ends Binance Relationship, Holds Talks With SEC
Binance's CEO Changpeng Zhao has taken a stance against the SEC's position on stablecoins, agreeing with crypto analyst Miles Deutscher's stance of "how on earth is a STABLECOIN considered a security, when it clearly doesn’t meet the Howey Test criteria?"
5/ On the alleged SEC vs Paxos lawsuit, I have no information about it, other than public news articles. The lawsuit is between the US SEC & Paxos.
— CZ 🔶 Binance (@cz_binance) February 13, 2023
I am not an expert on US laws. But personally, I agree with Mile’s logic here (not that it means much): https://t.co/b8H3bjLAoy
The debate is has also left Ripple hanging in the balance since 2020 as the SEC weighs up whether XRP is a security.
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