Former SEC Chair: A Security Today May Not Be a Security Tomorrow

Jay Clayton agrees with Gary Gensler that “securities cover a very wide swathe of crypto,” but says courts are not the place to resolve asset classifications

article-image

DarkDiamond67/Shutterstock modified by Blockworks

share

Former SEC Chairman Jay Clayton believes crypto tokens that might be deemed securities today might not be in the future. 

Clayton’s comments during a Friday interview on CNBC come as the SEC and CFTC fight for jurisdiction over crypto assets, and perhaps further mystifies industry folk seeking clarity on whether various tokens are securities or commodities. 

Current SEC Chairman Gary Gensler has said in interviews in the past year that while he views bitcoin as a commodity, most other crypto assets are securities.

“I do agree with Gary [Gensler] that securities cover a very wide swathe of crypto,” Clayton told CNBC Friday. 

When asked if ether (ETH) is a security or a commodity during a House Financial Services Committee meeting earlier this week, Gensler did not give a clear answer

CNBC asked Clayton the same question, to which he responded: “Things can go from being a security to not a security.”

The Howey Test — named for the 1946 Supreme Court case SEC v. W.J. Howey Co. — is used to determine what is deemed an “investment contract,” therefore falling under securities laws.

In a 2018 speech by William Hinman, then-director of the SEC’s division of corporation finance, he said looking at the way a crypto asset is sold is the best way to tell whether it is a security or not, noting that “current offers and sales of Ether are not securities transactions.”

Clayton seemed to agree with Hinman’s stance, saying in the Friday interview that Broadway tickets received for investing in a yet-to-be-produced play, for example, would be securities. Tickets bought years later to see that show, however, would not be. 

“[Ether] has many more hallmarks of just being a ticket than it does being a means to raise money,” he added.

The CFTC — in an action filed last month alleging that Binance and its CEO broke trading and derivatives laws — labeled bitcoin, ether and litecoin as commodities

The SEC is still tied up in a years-long lawsuit with Ripple Labs about whether XRP is a security. The regulator has more recently targeted Coinbase, for example, via a Wells notice related to potential alleged securities violations. 

Coinbase claimed in a blog post at the time that the company “doesn’t list securities.” 

“The courts are not an efficient place to resolve classifications around securities, commodities and the like,” Clayton argued. 

“Right now, we’re not in a spot where … the technology is going to come into the traditional financial system in any kind of smooth way,” he added later in the interview. “That’s what we should focus on.”


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research Report Templates.png

Research

ZKPs enable efficient offchain transaction processing and validation, resulting in increased throughput and reduced fees. Solana's ZK Compression leverages ZKPs to minimize onchain storage costs, while Sui's zkLogin streamlines user onboarding by replacing complex key management with familiar OAuth credentials.

article-image

The crypto asset manager lowered its planned fee from 0.25% to 0.15%, undercutting its competitors

article-image

Plus, a look at planned ETH ETF fees and how they differ from their BTC counterparts

article-image

North Korea suspected in breach of Indian exchange’s multisig wallet

article-image

Plus, Sanctum’s CLOUD token has officially launched — but not without problems

article-image

It’s not yet clear whether Donald Trump is pumping bitcoin. But an unofficial memecoin is still seeing benefit.