Yesterday the CFTC formally requested ‘public comment’ concerning whether or not Ethereum should be designated as a commodity or not (the ‘not’ would then throw it into the security designation and open up a whole mess of issues). Obviously, Ethereum and every coin/dapp that has been built on it has a vested interest in a commodity designation by the CFTC.
Here is the body of the request by the CFTC:
The Commodity Futures Trading Commission (“Commission” or “CFTC”) in furtherance of the LabCFTC initiative is seeking public comment and feedback on this Request for Input (“RFI”) in order to better inform the Commission’s understanding of the technology, mechanics, and markets for virtual currencies beyond Bitcoin, namely here Ether and its use on the Ethereum Network. The Commodity Exchange Act (“CEA”) grants the Commission regulatory authority over the commodity futures markets. The Commission is seeking public feedback in furtherance of oversight of these markets and regulatory policy development. The input from this request will advance the CFTC’s mission of ensuring the integrity of the derivatives markets as well as monitoring and reducing systemic risk by enhancing legal certainty in the markets. The RFI seeks to understand similarities and distinctions between certain virtual currencies, including here Ether and Bitcoin, as well as Ether-specific opportunities, challenges, and risks. The Commission welcomes all public comments on these and related issues.
Many have made the case that Ethereum is significantly more ‘centralized’ than Bitcoin and thus have serious questions about its commodity-type traits. Others believe that the breadth of the ERC-20 (at a minimum) ecosystem makes the case for its decentralization – thus making it a clear commodity.
Whatever the arguments are either way we believe, based on one conversation with a staffer at the CFTC, that the request for comment is a mere formality. Internally the decision to designate Ethereum as a commodity is all but made.
**We have two separate and reliable sources connected to the CFTC. One was willing to give us an anonymous comment, the other spoke with us but asked that the comments be left out of this article.
As per the thinking at the CFTC:
“The request for comment is seen as a reasonable procedural process to check the box before announcing the commodity designation. Chris understands the digital assets landscape really, really well and knows that there is less consensus on this than there was for Bitcoin. This step will give some background to the decision and he expects the comments to be largely in favor of a commodity designation.”
Any policy decision in the crypto space will have long-lasting and even unintended consequences. It makes sense to consider every angle and every reasonable outcome of a commodity designation for Ethereum. Several institutions are counting on the decision going in that direction.
ErisX, Bakkt, Goldman Sachs and others have plans to list/trade Ethereum based on its eventual designation as a commodity. ErisX has already announced its intentions, Bakkt initially listed Ethereum as one of its two launch tokens before they decided to wait for the formal word from the CFTC, and Goldman Sachs is preparing to offer an Ethereum based product for its upper-crust clients.
The ripple effects of this decision will resonate throughout 2019 and give context to every other token that claims to be a commodity/utility and not a security.
The CFTC and Chris Giancarlo are playing it smart.