“If you’re trying to say that virtually every token, except Bitcoin, is a security, that raises an existential threat to Coinbase and the whole crypto economy,” said Aitan Goelman, a partner at Zuckerman Spaeder and previously a director of enforcement at the CFTC.
Representatives for the CFTC and SEC declined to comment.
In a sign of the tension at the CFTC, Republican Commissioner Caroline Pham broke with typical Washington protocol by issuing a statement on the SEC’s insider trading case critiquing the agency’s move as “regulation by enforcement” with “broad implications beyond this single case.”
Kristin Johnson, a Democratic commissioner at the derivatives watchdog, said people should be focused on protecting investors and not over any brewing turf battles. “Policing markets is a shared priority,” she said in an interview.
For its part, the SEC has long said many coins are subject to its investor-protection strictures and that trading platforms should register with the agency, though none of them have.
As the CFTC and SEC jostle over which tokens are securities, several bills have been proposed in Congress to sort out the confusion.
One highly-watched piece of legislation from Cynthia Lummis, a Republican senator from Wyoming, and Kirsten Gillibrand, a Democratic senator from New York, would significantly expand the CFTC’s role. On Tuesday, Pat Toomey, the highest-ranking GOP member of the Senate Banking Committee, sent a letter to Gensler criticizing the SEC’s approach on crypto.
Beyond Gensler, and his predecessor Jay Clayton, suggesting that the vast majority of tokens are securities, the regulator has mostly avoided weighing in on specific coins. The lack of specificity has prompted calls in the industry for more clarity -- including last week from Coinbase itself.
Meanwhile, an SEC enforcement action against the platform or a potential court ruling over whether certain tokens are securities, could call into question many digital exchanges’ business operations.
“The uncertainties and competing visions about crypto regulation are coming to a head,” said Andrew Verstein, a professor of law at the University of California, Los Angeles.
With its latest moves, the SEC is showing it’s willing to bet--potentially in court--on its vision of how the space should be regulated, he said.
This article was provided by Bloomberg News.