Gary Gensler’s stance on crypto tokens as securities
Before becoming the chair of the U.S. Securities and Exchange Commission (SEC), Gary Gensler had a clear view on the classification of crypto tokens. He stated on multiple occasions that bitcoin, ether, litecoin, and bitcoin cash likely did not pass the threshold for securities, while tokens issued through initial coin offerings (ICOs) did. If a token is determined to be a security, it is subject to stricter regulatory supervision under the purview of the SEC.
“Over 70% of the crypto market is bitcoin, ether, litecoin, bitcoin cash. They’re not securities,” Gensler said at an institutional crypto conference held at Bloomberg’s headquarters in 2018. He emphasized that three-quarters of the crypto market were not ICOs or securities, referring to them as just commodities or cash cryptos.
Most ICOs are securities
At the Bloomberg conference, Gensler stated that most ICOs, naming Ripple’s XRP and EOS, likely met all four criteria of the Howey test, rendering them securities. Today, Gensler and the SEC claim that most tokens are securities, aligning with his views on ICOs. However, they have not clarified whether this applies to ether.
In the SEC’s lawsuit against Coinbase filed earlier this month, it claimed that the exchange offering ether through a staking service was a security, but it didn’t touch on the underlying asset itself. When asked about ether in April, Gensler remained vague, stating that if the public anticipates profits based on the efforts of others in a common enterprise, those are the signs of a security. As for whether the SEC should issue more guidance on ether, he replied that the space already has clarity.
Coinbase is currently suing the SEC for more clarity, while Ripple Labs hopes that documents released today relating to the Hinman speech in 2018 will provide more insight.