CFTC Chair Reaffirms Bitcoin and Ethereum as Commodities in Senate Testimony

TLDR

• CFTC Chair Rostin Behnam reiterated to the U.S. Senate that Bitcoin and Ethereum are commodities.
• A recent Illinois court ruling classified Bitcoin and Ethereum as commodities under the Commodity Exchange Act.
• Behnam argues that the CFTC should have regulatory oversight of Bitcoin and Ethereum to protect investors.
• The CFTC chair outlined five legislative priorities for better regulation of digital commodities.
• While this court ruling is significant, it’s not legally binding for other courts or jurisdictions.

In a recent testimony before the U.S. Senate Committee on Agriculture, Nutrition, and Forestry, Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam reaffirmed his stance that Bitcoin and Ethereum should be classified as commodities.

This classification would place these cryptocurrencies under the regulatory purview of the CFTC.

Behnam’s argument draws support from a July 3 ruling in an Illinois district court.

The case, involving a $120 million Ponzi scheme, saw the judge declare that both Bitcoin and Ethereum qualify as commodities under the Commodity Exchange Act. This ruling also extended to lesser-known cryptocurrencies Olympus (OHM) and KlimaDAO (KLIMA).

Today, I testified on digital commodity assets in front of the Senate Agriculture Committee. Read my remarks at https://t.co/JojHNdQoVh

— Rostin Behnam (@CFTCbehnam) July 10, 2024

The CFTC chair emphasized the need for federal legislation to create a regulatory framework for digital assets. He stated, “Our current trajectory is not sustainable.

Federal legislation is urgently needed to create a pathway for a regulatory framework that will protect American investors and possibly the financial system from future risk.”

To address these concerns, Behnam outlined five key legislative priorities for his agency:

1. Tailoring rules to meet the unique risk profile of cryptocurrencies
2. Establishing a permanent “fee-for-service model” funding structure
3. Requiring registrants to adhere to a comprehensive disclosure regime regarding their crypto assets
4. Enhancing Know Your Customer (KYC) and Anti-Money Laundering (AML) capabilities
5. Developing a framework to determine whether tokens are commodities or securities under existing law

Behnam also referenced a 2022 report from the Financial Stability Oversight Council, which highlighted a regulatory gap in the spot market for “digital assets that are not securities.”

BTC and ETH are commodities. pic.twitter.com/HKzgkRaWkn

— Dan (@DN_Founder) July 10, 2024

This report suggested that the CFTC should play a larger role in overseeing digital commodities.

While Behnam’s testimony and the Illinois court ruling have been seen as positive developments by some in the crypto community, it’s important to note that this court decision is not legally binding for other courts or jurisdictions.

Anthony Tu-Sekine, a partner at Seward & Kissel, explained that rulings at the trial court level are not binding on other courts in that jurisdiction or elsewhere in the country.

The classification of cryptocurrencies, particularly Ethereum, has been a topic of debate among regulators. While the CFTC has considered Ethereum a commodity since 2019, the Securities and Exchange Commission (SEC) has not explicitly stated its position.

However, the SEC’s approval of spot Ethereum ETFs in May 2024 was seen by some as an implicit acknowledgment of Ethereum’s commodity status.

Behnam stressed the importance of collaboration between regulatory agencies, stating,

“The SEC and CFTC have a longstanding partnership that facilitates strong, robust regulation of securities and derivatives markets. I am confident that the two agencies will continue working closely, ensuring a reliable, fair, and efficient system for listing and trading of digital assets on regulated exchanges.”