US Lawmakers Demand SEC Clarify Position On Ethereum in Prometheum Case

In a letter sent on March 26, the chairmen of the US House Financial Services Committee and the House Agriculture Committee asked Securities and Exchange Commission (SEC) chair Gary Gensler to clarify its position on crypto firm Prometheum’s plans to offer institutional custody services for Ethereum (ETH). They requested Gensler because of potential regulatory disparities between the Commodity Futures Trading Commission (CFTC) and the SEC regarding Ether’s classification.

#NEW: Republicans on the House Financial Services Committee and @HouseAgGOP sent a letter to @SECGov Chair Gensler urging his agency to clarify its position with respect to SPBD Prometheum’s custody of #ETH.

Read more 🔗https://t.co/MGGB9NAvWi pic.twitter.com/1U8lqMw8Ao

— Financial Services GOP (@FinancialCmte) March 26, 2024

SEC and CFTC’s Stance on Ethereum

The SEC has recently declared that it plans to classify ETH as a security. Some experts have suggested that this stance may lead to the SEC denying approval for spot ETH exchange-traded funds (ETFs). In contrast, the CFTC has remained consistent in categorizing digital assets like Bitcoin (BTC) and Ether as commodities. Such a contrast in the outlook of the two regulatory agencies has resulted in the absence of a clear classification regarding ETH.

The letter to Gensler emphasizes the importance of the SEC decision on the matter, claiming that the absence of clear guidelines from regulators could lead to “irreparable consequences for the digital asset markets”. Legislators asked whether special purpose broker-dealers (SPBDs) like Prometheum can hold non-security digital assets and what regulatory consequences would result. They requested a response to their questions by April 9.

The letter poses the question:

“Is ETH a digital asset security?”

Moreover, the SEC and CFTC have an “extensive public record identifying Ethereum as a non-security digital asset”. The letter criticized the SEC for not providing comprehensive guidance or rules for asset classification.

The lawmakers stated:

“[T]he SEC’s failure to propose a rule or provide comprehensive guidance that provides clear rules for the digital asset marketplace regarding asset classification has only exacerbated the uncertainty in the digital asset ecosystem.”

After Prometheum revealed its Ethereum custody plans in February, CFTC Chair Rostin Behnam reiterated the commission’s position on ETH during a House Financial Services Committee hearing. Behnam said if the SEC declares Ether as a security, it would cause issues for CFTC’s registrants. It would be a “critical” situation, he added. Moreover, CFTC Commissioner Kristin Johnson proposed different possible paths to achieve regulatory clarity on crypto.