United States Securities and Exchange Commission Chair Gary Gensler has again suggested that proof-of-stake coins may be securities. He expressed his view on March 15 after a commission meeting on cybersecurity issues.
Gensler was asked by reporters about his reaction to statements made by Commodity Futures Trading Commission Chair Rostin Behnam at a Senate Agricultural Committee meeting last week that he felt stablecoin and Ether (ETH) were “going to be commodities.” Gensler replied, as reported in The Block:
“The investing public is investing anticipating a return, anticipating something on these tokens, whether they’re proof-of-stake tokens, where they’re also looking to get returns on those proof-of-stake tokens and getting 2%, 4%, 18% returns.”
“Whatever they’re promoting and putting into a protocol, and locking up their tokens in a protocol, a protocol that’s often a small group of entrepreneurs and developers are developing, I would just suggest that each of these token operators […] seek to come into compliance, and the same with the intermediaries,” he continued.
Gensler has voiced his opinion on proof-of-stake coins before. In September, after the Ethereum Merge, Gensler said proof-of-stake coin holders were members of “the investing public anticipating profits based on the efforts of others.”
️ Open Commission Meeting ️
Tomorrow, March 15th, at 10am ET we will have an @SECGov open meeting to discuss:
Proposed changes to Regulation S-P
A Proposed Cybersecurity Risk Management Rule
Proposed changes to Regulation SCI
— Gary Gensler (@GaryGensler) March 14, 2023
Later that month, Gensler told a Senate Banking Committee that staking is “another indicia that under the Howey test, the investing public is anticipating profits based on the efforts of others.”
Related: Proof of Stake Alliance publishes white papers on legal aspects of liquidity staking
The Howey test, which dates to 1946, is used in U.S. law to identify securities.
Earlier this year, the SEC also forced cryptocurrency exchange Kraken to discontinue its staking service and pay a $30 million settlement on Feb. 9, setting off concerns that the agency was preparing a new round of enforcement actions in the cryptocurrency industry. Gensler said at the time, “If they want to offer staking, we’re neutral. Come in and register, because investors need that disclosure.”