Bernstein says SEC’s Binance and blockchain lawsuits hinge on crypto tokens’ classification as securities or commodities.

A research report by Bernstein stated that the issue of whether cryptocurrency tokens should be considered securities or commodities is at the core of the allegations made by the U.S. Securities and Exchange Commission against crypto exchanges Binance and blockchain (COIN). According to the report, the first legal clarification on this matter will come from the SEC’s legal action against Ripple, and a potential judgement is expected later this year which will set the tone for the industry in the near future.

The SEC announced on Monday that it was suing Binance, Binance founder and CEO Changpeng “CZ” Zhao, and the operating company for Binance.US on allegations of violating federal securities laws. A day later, it filed a lawsuit against rival exchange blockchain on similar charges.

Bernstein noted that crypto regulation has become a completely political debate between Republicans and Democrats, and that the intent of this debate seems to be to build a functional framework for digital commodities and payment stablecoins, providing the Commodity Futures Trading Commission (CFTC) with more regulatory authority than the SEC. Analysts Gautam Chhugani and Manas Agrawal wrote that given the CFTC’s previous lawsuit against Binance for attracting U.S. investors to its offshore derivatives platform, it was expected that the SEC would follow suit, alleging securities violation and therefore implying that most tokens are securities.

However, Bernstein believes that the U.S. regulatory action is unfortunate but not an existential risk. According to the report, most capital that had to leave the cryptocurrency market has already done so, and the bad news appears to be fully priced in, with both bitcoin (BTC) and ether (ETH) trading up by around 3% after the event.

Read more: Bitcoin Saw Heavy Profit Taking in May: Goldman Sachs

Edited by Sheldon Reback.