What Are the Implications of a “Security” Vs. “Commodity” Classification for a Crypto Derivative Product?

Classification determines the primary regulator and the applicable legal framework. A "security" derivative falls under the SEC's jurisdiction, subject to the Securities Exchange Act.

A "commodity" derivative falls under the CFTC's jurisdiction, subject to the CEA. Security classification typically involves stricter disclosure, registration, and anti-fraud requirements.

This difference significantly impacts how the derivative product can be offered and traded.