Upper Cumberland Times

U.S. Representative John Rose, Vice Chairman of the House Financial Services Oversight and Investigations Subcommittee, has led a letter addressed to SEC Chair Gary Gensler. The letter expresses concerns about Prometheum Capital's recent "soft-launch" of custody services for Ethereum. Rep. Rose, who serves on both the House Committee on Agriculture Digital Assets Subcommittee and the House Committee on Financial Services Digital Assets Subcommittee, has been vocal in his criticism of what he describes as the SEC's regulation-by-enforcement approach towards digital assets.

The letter asserts that "Prometheum’s statements and actions with respect to ETH are misleading and have already caused confusion in the marketplace." Prometheum had previously drawn attention from members of the House Financial Services Committee due to national security and data privacy concerns.

Rep. Rose released a statement saying, “Players in the digital assets space deserve certainty from their regulators,” adding that under Chair Gensler, they have faced "chaos and confusion."

The full letter highlights ongoing concerns regarding Prometheum Capital’s May 2024 launch of custodial services for Ethereum. It notes that a special purpose broker-dealer (SPBD) registered with FINRA is not allowed to custody or facilitate trading in digital assets unless deemed securities by the SEC or a court.

The letter further points out that while the SEC approved several Ethereum spot exchange-traded funds (ETFs) in July 2024, it also clarified in its complaint against Binance that "crypto asset securities" refers only to how an asset is sold rather than the asset itself. Additionally, a settlement with eToro allows continued offering of Bitcoin, Bitcoin Cash, and ETH on its platform.

Despite this context, Prometheum has publicly declared ETH as a security and plans to offer custodial services for it. The signers question how Prometheum can comply with SEC and FINRA rules given its SPBD status permits custody of securities only.

Republicans on relevant committees have emphasized that Prometheum’s actions add to market confusion regarding compliance with SEC and CFTC rules. They argue that by allowing Prometheum's claims about ETH being a security or part of an investment contract without clear regulatory intervention, both SEC and FINRA contribute to ongoing uncertainty harming market participants.

The letter was signed by Representatives French Hill (AR-02), Dusty Johnson (SD-AL), William Timmons (SC-04), and Mike Flood (NE-01).

Prometheum is notable as the first digital assets trading platform licensed as a Special Purpose Broker Dealer by the SEC for trading digital asset securities. Its classification of Ethereum as a security conflicts with prior indications from the SEC treating it as a commodity.

During an earlier hearing this year, Rep. Rose questioned Chair Gensler about whether an SEC-licensed platform could offer commodities; Gensler responded negatively regarding offering anything other than securities.

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