Speaking on the Unchained podcast on May 23, Dan Berkowitz muddied the regulatory waters even further by stating that crypto assets can be both commodities and securities.

The notion goes against the opinion of Securities and Exchange Commission Chair Gary Gensler who asserts they are all securities with investment contracts.

Referring to Ethereum, he said there is a “special case” where something can be both. “It can be a commodity under the CEA [Commodity Exchange Act] and a security, and that would be like a futures contract on a security, which would be like a futures contract on Apple stock.”

If the regulators are still unclear on the status of digital assets such as Ethereum, what hopes do the crypto companies and exchanges have with their compliance efforts?

🤔 In crypto, it’s “commodities” vs. “securities.” Former CFTC commissioner Dan Berkowitz says an asset can indeed be both.

🔊 Full episode: pic.twitter.com/zaaB4uSfzN

— Laura Shin (@laurashin) May 23, 2023

Clear as Mud

CFTC Chair Rostin Behnam also faced the burning question in a Bloomberg podcast published on May 23.

Behnam was asked if the logic that applied to viewing Ethereum as a commodity could be applied to other layer-1 blockchain assets such as Solana.

He said there are two listed futures contracts for BTC and ETH, which was a “market-driven effort by exchanges and probably client demand” and had nothing to do with whether they were commodities or securities.

Behnam added that there is a lot of legal analysis by exchanges and open dialogue with the CFTC before such products can be listed. This was carried out before approval of the BTC ETF in 2017 and ETH ETF in 2020, he said before adding:

“In the context of your question of is it a security or commodity, there’s no doubt that we within the agency and at the staff level examine the characteristics of the financial asset to ensure that it complies with the law and that is falls within the definition of a commodity, and more importantly, is not a security.”

“If you look up the definition of a commodity under the CEA, nearly everything is a commodity, including securities,” he added.

How do you regulate crypto? Is it a security, a commodity, or something else? CFTC Chair Ros Behnam gets into this and more on this Odd Lots episode, recorded live at the ISDA annual meeting

— Bloomberg Crypto (@crypto) May 21, 2023

Regulatory Pressure Continues

Meanwhile, the SEC, which assumes very few crypto assets are commodities, continues to crack down by enforcement on digital asset firms.

Until these two federal agencies can work together and define digital assets with guidance from Congress, the regulatory uncertainty in the U.S. will continue, driving talent, innovation, and investment overseas.