Matthew Comstock of the firm’s FinTech & Blockchain Practice authored an article regarding Securities and Exchange Commission jurisdiction over crypto assets in the Expert Analysis section of Law360 (8/26/21). In the article, Mr. Comstock analyzes the SEC’s stance on cryptocurrency and provides insight as to why the SEC believes it is uniquely qualified to protect the investing public.
In early August, Gary Gensler, Chair of the SEC, asserted that the Commission has broad jurisdiction over crypto, noting that it has "taken and will continue to take our authorities as far as they go." Gensler contends that the SEC has authority over almost every aspect of the crypto space and rejects the notion that crypto assets could be classified as money.
Mr. Comstock explains that Gensler seems to take the position that crypto assets in general are investment contracts under the Securities Act, as interpreted in the 1946 U.S. Supreme Court case of U.S. v. Howey. Considered controversial in the crypto space, the Howey test is used to assess whether a specific asset can be classified as a security. Mr. Comstock elaborates on this idea, discussing how crypto assets are more complicated to define than traditional currencies.
A clear definition between securities and nonsecurities in the crypto space is what Mr. Comstock suggests is a necessary step in communication and clarity from the SEC.