CFTC Could Approve Ethereum Derivatives Trading in the Near Future

CFTC federal court on cryptocurrencies

Commodity Futures Trading Commission (CFTC) Chairman Heath Tarbert in All Markets Summit by Yahoo Finance spoke about Ether(ETH) being a commodity and thus should fall under the jurisdiction of CFTC. He further hinted on Ether Futures trading in the US markets in the near future.

CFTC Chairman Speaks About Ether

Tarbert in the summit also said that CFTC had always been clear on Bitcoin and the fact that it is a commodity. He further mentioned that per his view as the Chairman of the CFTC, Ether is a commodity. Thus, resonating with SEC’s previous ruling that Bitcoin and Ether are not securities. Furthermore, he said that CFTC is working in close cooperation with the SEC to provide clarity on these issues.

Long back in 2015 CFTC had said that Bitcoin and other virtual currencies are commodities. This was even before the SEC deemed cryptos as commodities. Interestingly, this is the first time CFTC has spoken any such thing about Ether. 

Tarbert says that “forked” assets like Bitcoin Cash (BCH), Bitcoin Gold (BTG), and Ethereum Classic (ETC), should be treated by regulators the same as the original asset. Tarbert said

“It stands to reason that similar assets should be treated similarly. If the underlying asset, the original digital asset, hasn’t been determined to be a security and is, therefore, a commodity, most likely the forked asset will be the same. 

He continued saying, 

“Unless the fork itself raises some securities law issues under that classic Howey Test.”

The “Howey Test” refers to a 1946 case involving the selling of shares in a citrus grove that the SEC now uses as its north star in determining whether a digital currency behaves like security. 

Ethereum Perpetual Contacts Suffer as Prices Remain Unscathed

While CFTC’s announcement brings in a ray of hope for Ethereum enthusiasts, Ethereum perpetual contracts are going through a rough phase in October in terms of time settlement. September saw several investors entering the Ethereum market as bullish sentiment was observed on Bitfinex. Moreover, Ethereum rose from $183 to $216.70, a price hike that had a positive effect on its derivatives market. 

Source- Skew Markets

Insurance fund for a Futures or Perpetual contract is kept in order to cover the negative equity of unsuccessful liquation on the trader’s position. The fact that makes it important is that any possibility of inadequate payoff on a winning derivative trade for a user can be avoided.

The bullish sentiment has inadvertently gone for a toss. As a matter of fact, over 10,000 Ether calls were traded on ETH futures, where bets were placed on ETH crossing a valuation of $500 by the end of December. However, the bets were placed before the spike in September. Since then the market has returned to a standstill with the current price at $189.14. 

It will be interesting to note how far CFTC Ether derivatives perform? Let us know, what you think in the comments below!

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