The lawsuit filed by the Commodity Futures Trading Commission (CFTC) against Binance Holdings and CEO Changpeng Zhao (CZ) may also have implications for the Ripple case against the U.S. Securities and Exchange Commission (SEC). Blockbytes wrote that the CFTC’s lawsuit filed yesterday highlights an interesting battle at the U.S. regulatory level.
The CFTC writes in its complaint that Bitcoin, Ethereum and Litecoin are all commodities. However, Neil Hartner, senior staff software engineer at Ripple working on On-Demand Liquidity (ODL) cross border payments, warns in a tweet not to be too euphoric about the statement.
“Don’t get excited if the CFTC refers to some crypto as a commodity. The CFTC already made it clear in the Telegram case that commodities can also be securities. Worst of both worlds if you’re both. Double the regulators and confusion to deal with,” Hartner wrote on Twitter.
The Ripple employee was also referring to a tweet by Paul Grewal, chief legal officer at Coinbase, who also pointed out this issue:
A security can apparently also be a commodity, except when it’s not. And it depends on which regulator you ask, and when. If you’re confused, you are not alone. Is this really the best American law has to offer?
Hartner further noted that a commodity may be subject to security laws, but no security can be subject to commodity laws, adding: “We all believe the answer is no but the SEC is intentionally avoiding the question and weaponizing the ambiguity.”
LBRY Case Shows Pathway For Ripple And The Crypto Industry
The use of ambiguity as a weapon against the crypto industry is most evident in the transcript of the November 21, 2022 status hearing between LBRY and the SEC, which has only now been made available to the public. CryptoLaw posted the transcript on its website yesterday.
The document reveals how LBRY CEO Jeremy Kauffman asks to speak directly to the judge about how the SEC has rejected every offer of remediation he has made. This was against the backdrop of the agency refusing to say what the rules were for five years before he was sued.
Judge Paul Barbadoro expressed “sympathy” for LBRY’s situation and asked the SEC why it is not clarifying the remaining issues on remedies and secondary market status for LBC so there is clarity for LBC holders. SEC attorney Peter Moore responded in a dismissive manner and claimed that there have been “numerous discussions over the years” about “what would be a pathway.”
In an exasperated response to Moore, Kauffman goes to the heart of his company’s abuse by the SEC and any company it sues. Kaufman said, “You are a liar, Peter,” and “I will do anything. They can say it right now. […] Is it not a security now? […] These are simple questions.” However, LBRY and Kaufmann did not receive an answer.
It is clear that the SEC does not want clarity, but wants to strike down the crypto industry in an Operation Choke Point 2.0. With its lawsuit, Ripple is at the forefront and may face a fight for years to come if the case goes to the Supreme Court.
The law firm that represented the original Operation Choke Point case in 2014 has just published a whitepaper explaining how banking regulators will use the same unlawful threats and leverage against the crypto industry in 2023, noted Jake Chervinsky, chief policy officer at the Blockchain Association.
At press time, the XRP price stood at $0.5108, rising 6.4% within the last 24 hours.
Featured image from iStock, chart from TradingView