The Securities & Exchange Commission (SEC) and CFTC are continuing to consider reviews to determine whether Ethereum is a security and if it needs to be subjected to US federal regulations as any other type of security in the market.
The bone of contention arises from the 2014 Ether (ETH) token presale that raised 31,000 BTC which was then equivalent to $18.3 million and $300 million today.
The SEC argues that in so doing, it qualified the Ethereum token as a security and as such, it carried out an illegal security sale.
But Ethereum co-founder Joseph Lubin feels strongly against this and states that Ether fails the Howey Test which is a defined set of conditions that defines a Security.
Mr. Lubin along with the Ethereum Foundation said they were “absolutely unconcerned” regarding the reports that the Securities and Exchange Commission (SEC) was contemplating whether it can and should regulate Ether (ETH).
The implication that ICO sales are rather speculative drives the argument for the SEC. ICOs are intended to raise funds to help build systems but the SEC feels they are more profit driven. The scrutiny exempts Bitcoin which was not first offered as an ICO.
The Ethereum Foundation explains that Ethereum in itself is not a cryptocurrency but a platform for building systems and programs based on the Ethereum blockchain. It shouldn’t be confused with Ether, which is the native cryptocurrency that is part of the Ethereum project.
If considered a security, the ICOs built on the Ethereum blockchain and also the Ethereum Foundation risk facing penalties and effectively being subjected to the 1933 Securities Act.
The examinations are also looking into whether Ethereum Foundation has any influence on the value of Ether in supply or issuance. Ether is currently available on several US exchanges.
Alongside Ethereum’s ETH, the SEC and CFTC will also look into Ripple’s XRP.