- SEC Chairman believes cryptocurrencies that allow holders to stake tokens may be defined as a security.
- Earlier SEC did not see ETH as a security, it was rather considered a commodity.
- Michael Saylor believes ETH may have just caught the attention of the SEC.
On Thursday, the chairman of the Securities and Exchange Commission (SEC) Gary Gensler said that cryptocurrencies and intermediaries that allow holders to “stake” their coins may be defined as a security under the Howey Test.
Gensler reported in a statement:
From the coin’s perspective that’s another indication that under the Howey test, the investing public is anticipating profits based on the efforts of others. Intermediaries offering staking services to its customers look very similar — with some changes of labeling — to lending.
The SEC has been monitoring the crypto space, particularly those that it alleges are securities. The regulator has been already been embroiled in a case against Ripple Labs concerning the XRP token.
The SEC has previously said they didn’t see ETH as a security, with both the Commodity Futures Trading Commission (CFTC) and the SEC agreeing that it acted more like a commodity.
The news also caught the attention of MicroStrategy CEO Michael Saylor, who retweeted it on his Twitter handle. Saylor believes ETH’s upgrade may have just turned the second-largest cryptocurrency into a security in the eyes of the SEC.
— Michael Saylor⚡️ (@saylor) September 16, 2022
The news soon spread like wildfire, the director of digital assets strategy at VanEck Gabor Gurbacs also took his stance on Twitter. Gurbacs clarified that regulators refer to rewards from staking as dividends, which is a feature of the Howey test. While summing up, Gabor added that he believes computer programs that are not used to raise money or promise dividends should not be categorized as a security.
For the uninitiated, the Howey Test refers to the U.S. Supreme Court case that determines whether a transaction qualifies as an “investment contract.” The clause is subject to disclosure and registration requirements under the Securities Act of 1933 and the Securities Exchange Act of 1934.