TL; DR
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‘Commodities’ are things (e.g. oil, gold, wheat), while ‘securities’ are shares in ordinary companies (i.e. corporations). The SEC thinks ETH is a security.
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How about some light reading on securities law to kickstart your Friday morning?
We’re going to discuss the legal arguments from both sides, as simply as we can.
OK ready? Okay, let’s go!
Understanding the argument:
‘Commodities’ are things (e.g. oil, gold, wheat), while ‘securities’ are shares in ordinary companies (i.e. corporations).
The SEC’s argument essentially claims that:
ETH tokens represent shares in the “common venture” (company), namely the Ethereum network, where buyers expect to make a profit based on the efforts of others (developers).
The argument being made by the companies now being sued for selling an ‘unregistered security’ (ETH tokens) is this:
Everything the SEC says is true…EXCEPT for the claim that Ethereum is a joint venture (company).
It is instead: an open source project, without a central team (e.g. a board) that has the final say on what can/cannot be done with the network.
That means ETH tokens are better framed as a commodity, like gold (which is used as both money and a store of value).
Sure, gold mining systems have been continually updated over the centuries – but that doesn’t mean gold (the metal) is a ‘business’ – it’s still just a ‘thing’.
The same goes for ETH tokens – yes, the method of mining them has changed with ‘The Merge’ update…
But the tokens themselves are still just “things” that we use as money and as a store of value.
Here’s our guess as to how this will work out:
The Ripple XRP case will spell the downfall of the SEC.
(It gave legal precedence that the public sale of crypto tokens similar to ETH does not = the sale of unregistered securities).
But then again, we’re not lawyers.