Speaking to the Senate Banking Committee, which oversees its establishment, SEC Chairman Gary Gensler said PoS cryptocurrencies could fall under securities laws – the purview of the SEC, not the Commodity Futures Trading Commission (CFTC), which often regulates cryptocurrencies in the US as digital commodities.
SEC chairman Gary Gensler said that steakable cryptocurrencies could be defined as securities under the Howey test, The Wall Street Journal reported.
“…Under the Howey test, the investing public expects returns based on the efforts of others. It’s very similar – with some labeling changes – to lending,” explained Gensler.
The Howie test – named after the landmark 1946 case – helps determine what counts as a security and what does not.
While the value of ETH was based on proof of performance, Ethereum was not considered a security – a point of contention often raised by Ripple during its confrontation with the SEC.
The SEC has made it clear that crypto platforms offering lending services must register with the agency in order to operate legally. A bill that would give the CFTC expanded powers to regulate cryptocurrencies is currently pending in the US Senate.
Critics believe that, unlike the SEC, the CFTC is unable to properly regulate such a large market, at least with its current resources.