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Proof of State is the Wednesday edition of Fortune Crypto where Leo Schwartz delivers insider insight on policy and regulation.

No topic animates the crypto regulation crowd more than whether cryptocurrencies are securities or commodities, an esoteric question that should be relegated to law school electives but instead could determine the U.S. future of the industry.

Without rehashing the particularities of the Howey Test for the umpteenth time, the relevant upshot here is that if cryptocurrencies are securities, they fall under the jurisdiction of the Securities and Exchange Commission, an agency that has demonstrated a marked hostility to the sector. If cryptocurrencies are commodities, the more open-minded Commodity Futures Trading Commission is in charge.

That government agencies are constantly feuding for jurisdictional control—and the funding and bragging rights that come with it—is no secret. For the past few months, as debates over crypto regulation have escalated following the collapse of FTX, the CFTC and SEC have appeared to be waging a proxy war over the industry, laying claim to oversight by declaring their stance on various cryptocurrencies’ classifications through public testimonies and lawsuits.

When asked directly, however, leaders from both agencies will rebuff any notions of a turf war. Christy Goldsmith Romero, a commissioner for the CFTC, sponsor of its technology advisory committee, and former SEC attorney, did just that last week at the Chainalysis Links conference at a Midtown Manhattan Marriott, where we caught up a floor above the gathered law enforcement officials, crypto sleuths, and at least one K-9 police dog.

Whenever the CFTC declares some digital asset to be a commodity in a lawsuit, as it recently did with its complaint against Binance in March, Crypto Twitter erupts in glee. Goldsmith Romero threw cold water on the idea that this should be perceived as some slight against the SEC.

“It’s not an either/or—almost everything is a commodity unless it’s an onion or a movie ticket,” she told me. “Something can be a commodity and a security at the same time.”

In other words, for the CFTC to have jurisdiction over a company like Binance, it has to classify the assets in question as commodities. That doesn’t automatically preclude those assets from also being securities, which would take them out of CFTC jurisdiction. As Goldsmith Romero explained, whether an asset like Ether is also a security is the SEC’s call, not the CFTC’s.

“This or that is not the actual discussion,” she said. “It’s the question of whether it’s just this, or this and that.” (A sincere apology for turning this newsletter into an LSAT logic question.)

While Goldsmith Romero’s argument does not negate the reality of the SEC’s and CFTC’s jurisdictional tussle—a basic reality created by the lack of congressional action—she did caution against reading too much into policymaking from enforcement actions.

“It doesn’t reflect my reality to call it a turf war,” she said.

More pressing on her agenda will be the accountability of decentralized autonomous organizations, a hot-button topic that came into the limelight with the CFTC’s decision last year to target members of one such group, Ooki DAO. Expect that to be a major theme for her technology advisory committee this year. Still, Goldsmith Romero warned that the immaturity of the DeFi sector—and crypto more broadly—will mean that future cases will be based on facts and circumstances, rather than a bright-line rule about what constitutes decentralization.

Leo Schwartz
leo.schwartz@fortune.com
@leomschwartz