Securities and Exchange Commission Chair Gary Gensler suggested to reporters on Wednesday that tokens using staking protocols could be considered securities under U.S. law.
"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," Gensler said. "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."
Gensler made the remarks after being asked for his reaction to statements made last week by Commodity Futures Trading Commission Chair Rostin Behnam, who reiterated his own belief, and that of his agency, that ether is a commodity.
Gensler spoke to reporters after a commission vote advancing three proposed rules aimed at tightening cybersecurity, consumer privacy, and system standards for the securities industry, including at some firms involved in digital assets.
Gensler has previously said that proof-of-stake protocols could fall under U.S. securities laws, but he elaborated in more detail during Wednesday's remarks. The SEC also recently undertook it first staking-as-a-service enforcement action and settled with Kraken last month.
New York Attorney General Letitia James has separately argued that ether is an unregistered security and that its creators, including Vitalik Buterin, are not in compliance with U.S. securities law as part of an enforcement lawsuit filed against crypto firm KuCoin.
© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.