SEC Chair Gary Gensler avoids direct classification of Ethereum
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Securities and Exchange Commission (SEC) Chairman Gary Gensler did not directly address whether Ethereum was a commodity or a security in an interview with CNBC on Tuesday. Instead, he shifted the focus towards broader regulatory concerns, specifically the protection of American investors and the conduct of intermediaries in the crypto market.
“All I would say is, to me, the fundamental question is, is how do we ensure that the American investor is protected? And right now, they’re not getting the required or needed disclosures,” Gensler responded to an inquiry regarding Ethereum’s classification from Andrew Ross Sorkin on CNBC’s “Squawk Box” show.
“And the intermediaries in the center of this rather centralized market generally are conflicted and doing things we would never allow the New York Stock Exchange to do. The New York Stock Exchange is not allowed to trade against the investors,” Gensler stated.
Ethereum’s legal status is among the key areas of discussion since how Ether is classified could indicate how it could be regulated and whether it could be included in traded funds like ETFs. Unfortunately, Gensler did not provide a definitive answer.
In his brief comment on spot Ethereum exchange-traded fund (ETF) potential, the SEC Chair said the filings are currently under consideration. He redirected the conversation from specific outcomes regarding the Ethereum ETF to the broader goals of the SEC.
Despite the SEC’s stance on Ether remaining undisclosed, the agency’s alleged actions speak more than words.
A number of reports show that the agency is attempting to classify Ether as a security. The investigation into the Ethereum Foundation is reportedly part of this.
Recent court filings additionally pointed out that the SEC considered Ethereum unregistered security for at least a year. Numerous subpoenas and document requests have been sent to entities associated with Ethereum.
The focus on crypto is driven by the media
According to Gensler, crypto represents a small portion of the financial market. However, it draws widespread attention from journalists because it attracts a disproportionate share of scams, frauds, and regulatory issues.
When asked why the SEC spent so much time on crypto despite its modest $110 market capitalization, Gensler said the focus on crypto is driven more by the media and public interest than the SEC’s agenda.
“I’ve been on your show, what, a dozen times? And every show, you ask about crypto. And my guessing is this will be a majority crypto interview. While the capital markets are $110 trillion. So it’s also about where the financial media is focused,” Gensler asserted.
Gensler added that many tokens are not compliant with the necessary protections required by these laws. This noncompliance results in a lack of proper disclosures and protections for investors.
The SEC’s chief also avoided discussing the oversight of various market actors, including Robinhood, which recently received a Wells Notice from the SEC. He just said that investors need protection, and the SEC’s general role as a regulatory body is to ensure law compliance in securities trading.
The SEC has faced backlash from crypto community members and lawmakers after threatening a legal lawsuit against Robinhood’s crypto arm. Crypto critics argue that the SEC should protect investors rather than stifle crypto innovation and that it has put an excessive amount of focus on the industry.
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Author: Vivian Nguyen
