Ethereum futures contracts are really coming? Ethereum futures contracts are really coming?

This article comes from FXStreet & The Block & CoinDesk

Original author: MSTA & Nikhilesh De & Celia Wan & Rajan Dhall

Odaily Planet Daily Translator | Nian Yin Si Tang

Time is clearer

Heath Tarbert, chairman of the Commodity Futures Trading Commission (CFTC), participated in a "fireside chat" at DC Fintech Week this week, and said that we may see Ethereum futures sometime in 2020: "You may see a (Ethereum) futures contract in the next six months to a year... It's not clear how much trading volume it will have, because that's determined by the market, but my guess is that now that we have at least a little bit of (Ethereum futures contract qualification), I think market participants will consider it."

It’s unclear, though, who might actually be interested in offering ethereum futures contracts to the U.S. market. At least as far as Tarbert knows, no company has applied to launch such a product, but one is expected to come soon.

Spokespeople for CBOE and Intercontinental Exchange did not immediately respond to requests for comment. A spokesperson for CME told CoinDesk in a statement that the company currently has “no plans to launch additional cryptocurrency futures.”

Earlier this month, Heath Tarbert, who recently took over as CFTC chairman, said that ETH is a commodity and therefore falls under the jurisdiction of the CFTC. He also expects that the CFTC will allow ETH futures to be traded in the U.S. market in the near future. He said, "We are very clear about Bitcoin: Bitcoin is a commodity. To date, we have not said anything about Ethereum. As chairman of the CFTC, I believe that Ethereum is a commodity." Tarbert acknowledged that the status of many tokens is "ambiguous in the market," but he said that ultimately "similar digital assets should be treated similarly."

Tarbert added that “forked” assets like BCH, BTG, and ETC, which are created by forking the original underlying blockchain, should be treated like the original asset, “assuming that the fork does not affect the Howey test factors or otherwise raise issues with the definition of a security.” In other words, the CFTC’s classification of each token depends on how the token was created.

This has been widely discussed in the crypto community. Brian Kelly, CEO of crypto investment firm BKCM, said he is optimistic about the CFTC's identification of Ethereum and smart contracts as commodities. Kelly said such a classification would pave the way for institutional investors: "The CFTC's determination that Ethereum is a commodity is big news for the crypto space. This makes regulation clear. The CFTC now says, 'If you buy Bitcoin on these smart contract platforms, they are commodities. This opens the door for institutions to enter." Kelly explained that his conversations with institutions have also been around the possibility that Bitcoin and crypto as an asset will eventually be banned. However, the CFTC's decision to classify Ethereum as a commodity has eased such concerns for now.

But some people hold different views. Preston Byrne, a senior partner at the law firm Byrne & Storm, questioned the CFTC chairman's statement. In a blog post, Byrne claimed that the CFTC chairman's assessment of Ethereum was incorrect and that Ethereum had less in common with soybeans than with stocks.

Byrne said that if the U.S. SEC had not decided to give Ethereum special treatment, the CFTC chairman would be unlikely to say that Ethereum is a commodity. As for why the SEC chose to turn a blind eye, Byrne said: "There is a reason why Ethereum is different, not because of what the law says. Maybe it has become too big. If it is considered an investment contract, it may cause too much harm to investors and crypto companies. The only reason I can speculate that Ethereum is treated differently is that the plan is huge, and several large venture capital companies are lobbying to treat this token in a special way to make it different from all other tokens. They succeeded because money talks."

How to start?

Regarding how new contracts will be launched, Tarbert said: “In the past, most people didn’t self-certify, and if they wanted to create a brand new exchange and DCO (derivatives clearing organization), they would work specifically with us. So I think a lot of it depends on who wants to add Ethereum contracts to their trading platform. Is it one of the existing four major exchanges that have been working with the CFTC for many years, or is it a brand new platform that wants to do this specifically?”

Although Tarbert did not reveal the names of the four major crypto exchanges that specialize in derivatives, it is speculated that they may be Seed CX, ErisX, Tassat (formerly trueDigital), and LedgerX.

Speaking about pricing, he added: “What our market has been doing (for 150 years) is ensuring full price transparency.”

Asked how many more cryptocurrencies could be added to the list, Tarbert evaded the question: “With the work that the SEC, the CFTC, and other regulators are doing, it’s very likely that we’ll see more (cryptocurrency futures contracts), but I can’t say for sure at this point. But it will happen in the near future. It takes time — Bitcoin and Ethereum took us quite a while.”

There may be demand for other futures contracts. In the UK, Kraken Futures (formerly known as Crypto Facilities) offers BCH, LTC and XRP futures contracts to users, and these products have become more popular after Kraken acquired the company.

Working with the SEC

Tarbert said the application for certification of ethereum futures contracts was done in part in collaboration with the SEC, noting that under current federal law, any instrument that is not a security is “most likely” a commodity (although there are exceptions: Congress has clearly stated that movie tickets are not commodities, for example).

“What we’ve seen is that if (the SEC) does an analysis and concludes that a crypto asset is not considered a security under the old Howey test, it will be determined to be a commodity in most cases,” Tarbert said, adding that securities can be transformed into commodities and vice versa. Tarbert stressed that the SEC is the entity that determines what is a security, while the definition of a commodity falls under the jurisdiction of the CFTC, which is broader.

The SEC has recently launched a series of crackdowns on ICOs of tokens it considers to be securities. Earlier this month, the regulator filed emergency lawsuits against Telegram and TON issuers for unregistered sales of their Gram tokens, which the SEC considers to be securities. The SEC filed an "emergency action and obtained a temporary restraining order" against two offshore entities of Telegram's TON ICO, and a court hearing will be held in New York on October 24. Stephanie Avakian, co-director of the SEC's enforcement division, said the emergency action was intended to prevent Telegram from flooding the U.S. market with a large number of digital tokens, which the SEC said were illegally sold; the SEC accused the defendants of failing to provide investors with information about Gram and Telegram's business operations, financial status, risk factors, and management required by securities laws.

This follows a settlement between the SEC and Block.one, the company behind the EOS blockchain, for an unregistered ICO, which saw the latter pay a $24 million fine.