SEC Chairman Gensler Doubles Down On Stand That Proof-Of-Stake Crypto Assets May Be Securities

Gary Gensler, the chairman of the U.S. Securities and Exchange Commission (SEC), doubled down on his previous statement that Proof-of-Stake crypto assets may be securities.

Gensler has been making headlines over the past weeks for his unpopular stand on various issues surrounding cryptocurrencies, particularly his previous comment that "everything, other than Bitcoin is a security" and that he considered the world's largest crypto asset by market capitalization as a commodity.

This week, the SEC chairman reaffirmed his stand and suggested that proof-of-stake tones can meet the Howey Test's definition of securities, and therefore, should be under the purview of the Securities and Exchange Commission.

For Gensler, this kind of security could be triggered since investors expect a return when they purchase crypto assets supported by a proof-of-stake consensus.

"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 told reporters after a commission vote Wednesday.

"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 said.

When asked for his reaction to the statements made by Commodity Futures Trading Commission Chair Rostin Behnam at a Senate Agricultural Committee meeting about stablecoin and Ether, the SEC chair said that they were "going to be commodities."

After Ethereum's successful transition from proof-of-work to proof-of-stake, Gensler said in September 2022 that proof-of-stake crypto asset holders were "investing public anticipating profits based on the efforts of others."

Gensler also told the Senate Banking Committee later that month that staking is "another indicia that under the Howey test, the investing public is anticipating profits based on the efforts of others."

Last week, Gensler's stance on proof-of-stake crypto assets as securities received an unexpected assist when the New York Attorney General's Office filed a lawsuit against the centralized cryptocurrency exchange KuCoin.

The case argued that the CEX violated U.S. securities laws when it offered tokens, including Ether, which met the country's definition of security and failed to register these tokens to the appropriate regulatory agencies.

"This action is one of the first times a regulator is claiming in court that ETH, one of the largest cryptocurrencies available, is a security," the New York attorney general's announcement read. "The petition argues that ETH, just like LUNA and UST, is a speculative asset that relies on the efforts of third-party developers in order to provide profit to the holders of ETH," it added.