US lawmakers demand SEC clarify position on Prometheum’s plans for Ether

According to a letter for SEC Chair Gary Gensler, leaving Ether in regulatory limbo between the SEC and CFTC could have "irreparable consequences for the digital asset markets.”

Lawmakers with the United States House Financial Services Committee and House Agriculture Committee have expressed concerns about how the Securities and Exchange Commission (SEC) intends to handle Ether (ETH).

In a March 26 letter to SEC Chair Gary Gensler, U.S. lawmakers, including House Financial Services Committee Chair Patrick McHenry and Vice Chair French Hill, urged the commission to address crypto firm Prometheum’s intention to offer institutional custody services for Ether. According to lawmakers, the announcement is at odds with the Commodity Futures Trading Commission’s (CFTC) stance on recognizing ETH as a “non-security digital asset” under its purview.

“[T]he agencies have an extensive public record identifying ETH as a non-security digital asset,” said the lawmakers. “There are multiple regulatory actions grounded in that position […] [Prometheum’s] action, if allowed to proceed, could have irreparable consequences for the digital asset markets.”

The SEC has recently made claims suggesting that it intends to classify ETH as a security. Some experts have suggested that this position may lead to the commission denying approval for spot Ether exchange-traded funds. The SEC has already approved investment vehicles tied to ETH futures for listing and trading on U.S. exchanges.

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In contrast, the CFTC has recognized many cryptocurrencies like Bitcoin (BTC) and Ether as commodities. The commission filed a civil enforcement action against KuCoin and two of its founders on March 26, claiming that ETH, BTC and Litecoin (LTC) were commodities and placing the exchange’s actions “squarely within the CFTC’s authority.”

The lawmakers added in the letter to Gensler:

“[T]he SEC’s failure to propose a rule or provide comprehensive guidance that provides clear rules for the digital asset marketplace regarding asset classification has only exacerbated the uncertainty in the digital asset ecosystem.”

Following Prometheum’s ETH custody announcement in February, CFTC Chair Rostin Behnam reiterated the commission’s position on Ether at a House Financial Service Committee hearing, warning of a potential conflict with the SEC over digital asset rules. In November 2023, CFTC Commissioner Kristin Johnson suggested several possible paths forward for regulatory clarity on crypto: through the courts, company policies and legislation from Congress.