WASHINGTON, D.C.—Benjamin Schiffrin, Director of Securities Policy, issued the following statement in connection with Better Markets’ new Fact Sheet and Report, “Crypto Should Be Regulated by the SEC under the Howey Test to Protect Investors and Enforce the Securities Laws”:

“The crypto industry has been fighting in every available arena to avoid being regulated by the Securities and Exchange Commission (SEC), which is known to be a tough and effective cop on the financial beat. For years now, the SEC has aggressively protected investors and markets from the predators and crooks in the crypto industry. In sharp contrast, the Commodity Futures Trading Commission (CFTC) has been a crypto advocate. That’s why the crypto industry is desperate to have the CFTC as its regulator. Indeed, the crypto industry argues that cryptocurrencies are, and should be regulated as, commodities.

“The problem is that the law is on the SEC’s side. That’s because of the seminal Supreme Court case for determining the scope of the federal securities laws: SEC v. J.W. Howey & Co. Howey, which broadly defines what is an investment contract and therefore a security subject to regulation by the SEC, ensures that the essential protections of the securities laws apply broadly and that the maximum number of investors are in fact protected.

“As shown in our fact sheet and report, the courts have consistently applied Howey to reject the argument that purchasing an asset in order to profit from its growth in value is the purchase of a commodity and not a security. Under Howey, the courts have found that investments in orange groves, Scotch whiskey, cattle embryos, earthworms, and rare coins were purchases of securities and not commodities because the purchasers bought the assets not to use or consume them but to profit from their investment. The application of Howey to investments in such a disparate group of assets indicates that crypto need not be treated any differently. Howey has governed the question of whether an investment scheme involves a security for almost 80 years. The framework that the courts have applied to all kinds of assets in that time is the same one that should apply to crypto.”

You can find the fact sheet here and report here.

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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.