TL;DR
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‘Commodities’ are things (e.g. oil, gold, wheat), while ‘securities’ are shares in common enterprises (i.e. companies), the SEC thinks ETH is a security.
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How about some light reading on securities law to kickstart your Friday morning?
We’re going to cover the legal arguments from both sides, as simply as we know how.
Ok, ready? Good, let’s go!
Understanding the argument:
‘Commodities’ are things (e.g. oil, gold, wheat), while ‘securities’ are shares in common enterprises (i.e. companies).
The argument made by the SEC essentially claims that:
ETH tokens represent shares in the ‘common enterprise’ (company) that is the Ethereum Network, where buyers expect a profit to be produced, based on the efforts of others (developers).
The argument being made by the companies that are now being sued for selling an ‘unregistered security’ (ETH tokens), is this:
All of what the SEC argues is true…EXCEPT for the claim that Ethereum is a common enterprise (company).
It is instead: an open source project, without a central team (e.g. a board) holding any final say on what can/can’t be done to the network.
Which means ETH tokens would be more appropriately framed as commodities, like gold (which is used both as money and a store of value).
Cause sure, the systems for mining gold have been constantly updated over the centuries — but that doesn’t mean gold (the metal) is a ‘company’ — it’s still just a ‘thing.’
Same goes for ETH tokens — yes, the method of mining them was changed with ‘The Merge’ update…
But the tokens themselves are still just ‘things’ that we use as money and a store of value.
Here’s our guess on how this will shake out:
The Ripple XRP case will be the SEC’s downfall.
(It set legal precedence that the public sale of crypto tokens similar to ETH, does not = the sale of unregistered securities).
But then again, we’re not lawyers.
