Gary Gensler, the U.S. Securities and Exchange Commission (SEC) chairman, is sticking to his stance that proof-of-stake tokens may satisfy the Howey Test’s definition of securities and fall under the SEC’s regulatory purview.

Gensler said securities rules might be activated because investors expect a return when they buy tokens supported by a proof-of-stake consensus mechanism, speaking to reporters following a commission decision on Wednesday. 

“Whatever they’re promoting and putting into a protocol, and locking up their tokens in a protocol, a protocol that’s often a small group of entrepreneurs and developers are developing, I would just suggest that each of these token operators … seek to come into compliance, and the same with the intermediaries,” Gensler said.

The Block states that reporters questioned Gensler about his opinions about remarks made last week by Rostin Behnam, chairman of the Commodities Futures Trading Commission (CFTC), saying that ether is a commodity and should be governed by his organization.

The two agencies have been in conflict over how to regulate the cryptocurrency markets for a long time. Although Gensler has stated that the “vast majority” of the thousands of existing cryptocurrencies are securities, he has been reticent to give up power — or, at least, the potential for future control — over any other cryptocurrency, including ether.

After the Merge, which converted the Ethereum blockchain to proof-of-stake in September 2022, Gensler proposed that investment contracts using proof-of-stake tokens should be subject to securities regulations.

Gensler’s claim that proof-of-stake tokens are securities received an unexpected boost last week when the New York Attorney General’s Office launched a case against the cryptocurrency exchange KuCoin.

The AG said in the lawsuit that the Seychelles-based exchange is breaking American securities laws by marketing tokens, such as ether, that fit the definition of securities without first registering with the appropriate authorities, in this case, the state AG’s office.

The NYAG lawsuit, however, filed in a state court rather than a federal court, is the first time a regulator has stated in court that ether is a security, notwithstanding Gensler and Behnam’s public back and forth.

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