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CFTC Claims Complex Language in Binance Lawsuit

2023.03.27 20:13

CFTC Claims Complex Language in Binance Lawsuit
CFTC Claims Complex Language in Binance Lawsuit

CFTC Claims Complex Language in Binance Lawsuit

By Tiffany Smith

Budrigannews.com – On March 27, the Commodities Exchange Act and CFTC regulations were allegedly broken by Binance, so the CFTC filed a lawsuit against the company. Those infringement included exchanges with Ether (ETH), as indicated by the suit. At first glance, this claim mentioned a significant disagreement between the Securities and Exchange Commission and the CFTC. 

“Digital assets that are commodities including bitcoin (BTC), ether (ETH), and litecoin (LTC) for persons in the United States,” the CFTC claimed in its lawsuit against Binance. The agency had held that position before. The CFTC guaranteed ETH was a ware in its suit against FTX in December, and Seat Rostin Behnam expressed his viewpoint that ETH and stablecoins were items as of late as Walk 8 in a Senate hearing.

Prior to the Ethereum Merge, the CFTC’s position on ETH was relatively uncontroversial. SEC Chair Gary Gensler made a comment about staking coins after Ethereum switched to a proof-of-stake consensus system, saying, “From the coin’s perspective, […] that’s another indicia that under the Howey test, the investing public is anticipating profits based on the efforts of others.”

The comment made by Gensler sparked a steady stream of responses. For instance, Ethereum co-founder and crypto entrepreneur Joseph Lubin stated to Cointelegraph in February that “staking is not a security” and that making it so would be a “terrible path for the U.S.” He went on to say that he believed the courts in the United States would agree with him and that if ETH were classified as a security, “there would be a tremendous outcry from not just the crypto community but different politicians and certain regulators.”

However, the CFTC’s case against Binance is limited to the larger argument because the nature of Binance products rather than ETH is at the heart of the case.

According to Timothy Cradle, director of regulatory affairs at Blockchain Intelligence Group, “in this particular case, ETH is being treated as a “commodity” rather than a “security.” ” Swaps and securities are mentioned in the complaint. Added by Cradle:

“The token’s definition could still be altered by the economics of an offering that includes ETH. For instance, ETH staking could still be considered a security and an investment contract.

Cradle stated that the SEC and CFTC could regulate mixed swaps involving ETH, but that “would not necessarily define ETH itself as a security as mixed swaps also include commodities and currencies.”

The two agencies would not necessarily need to work together to implement this more complicated approach to regulation. In a statement, Ice Miller partner Yankun Guo described the situation as follows:

“It demonstrates that the multifaceted nature of how tokens function and are used can cause them to fall under the jurisdiction of multiple agencies.” The SEC might sue in a similar manner, naming all of the same tokens, with the exception of BTC, as securities.

Silver lining

The CFTC suit against Binance states that ETH is a commodity

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CFTC Claims Complex Language in Binance Lawsuit

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