Gensler reiterates that Proof of Stake tokens can be securities- SEC Chairman Gary Gensler warned that tokens that use a Proof-of-Stake consensus mechanism could be classified as securities.
- Gensler urges token operators to comply with securities laws, noting that investors expect a return when purchasing these tokens.
- The NYAG lawsuit against KuCoin, arguing that ether is a security, also lends weight to Gensler’s argument.
SEC Chairman Gary Gensler reiterated his view that Proof of Stake tokens can be considered securities under the Howey Test, and therefore fall within the SEC’s regulatory purview. Speaking to reporters after the committee’s vote on Wednesday, Gensler explained that securities laws can be triggered because investors expect a return when buying tokens backed by proof-of-stake consensus mechanisms.
“No matter what they promote and put into a protocol, lock their tokens into a protocol, a protocol that is often developed by a small group of entrepreneurs and developers, I would just suggest that each of these token operators […] Seek compliance, same with psychics,” Gensler said.
Gensler also suggested that token operators and brokers seek compliance, after they promote and develop protocols that often come from a small group of entrepreneurs and developers.
Gensler’s comments came in response to comments from Rustin Behnam, chair of the CFTC, who said last week that ether is a commodity that must be subject to CFTC regulations.
There has been tension between the two authorities as they disagree over which organization should have the upper hand in managing the cryptocurrency markets. Previously, Gensler had claimed that the “vast majority” of existing cryptocurrencies are securities, including cryptocurrencies, and was reluctant to relinquish control of their regulations.
Last month, the New York Attorney General’s Office (NYAG) sued cryptocurrency exchange KuCoin, alleging that it violated US securities laws by offering tokens, such as ether, that meet the definition of security without registering with the appropriate regulators. This lawsuit is the first time a regulator has asserted in court that ether is a security, but it was filed in state court rather than federal court.
Moreover, the SEC has also ramped up its enforcement efforts in the cryptocurrency sector, recently forcing cryptocurrency exchange Kraken to suspend its offering for fixing and pay a $30 million settlement. Gensler stated at the time that “if they want to offer bets, we’re neutral. Come on and sign up, because investors need that disclosure.”
Gensler Reiterates Proof-of-Stake Tokens appeared for the first time in coin issuance.
