Gary Gensler, the chairman of the US Securities and Exchange Commission, brushed off questions about ethereum being an unregistered security or not. He said the commission does not pinpoint specific projects. The SEC doesn’t give legal advice through the airwaves.
Gensler told CNBC that the SEC doesn’t involve itself in public forums and nor does it talk about specific projects. He, however, said that if one is raising money from the public and the public is seeking profits based on the promoter or sponsor, the group’s efforts are within the securities laws.
CNBC’s Squawk Box tweeted the SEC chair saying that crypto tokens are raising money from the public. They are sharing the same set of disclosures with the public that helps them decide. Gensler questioned whether they are complying with advertising. He said its all about bringing into the securities law.
The Howey Test defines security as a tradable financial asset like stocks or bonds that has monetary value. An asset, under the US law, is an investment of money in a common enterprise. There is no exception of profit based on the enterprise’s efforts.
The watchdog had previously said that it doesn’t consider bitcoin to be a security. But it has pointed out other cryptocurrencies such as XRP, Ripple’s native token as an unregistered security. It should be noted that XRP has been sold for profits. But authorities in Japan have said that the XRP token is not a security.
Ripple which is presently facing a lawsuit filed by SEC, had inquired as to how the world’s two popular cryptocurrencies – bitcoin and ethereum were not securities. The SEC refused to provide documents saying it was classified.