Libra, which some have argued is essentially backed by a pool of investments, could be regulated as a security or as an exchange-traded fund, placing the Securities and Exchange Commission as its primary overseer. Unlike other overseers, like the Commodity Futures Trading Commission, the SEC doesn’t have a strong track record welcoming new financial products and would likely be more strict with Libra, several financial policy experts said. 

“Clearly the CFTC would be the first choice” for Facebook said Elliot Lutzker, a former SEC attorney and current partner at Davidoff Hutcher & Citron LLP. “They don’t want this to have to be a security.” 

At the House Financial Services Committee hearing, Marcus pushed back against Libra being classified as a security, saying that the digital currency wouldn’t pass the “Howey test,” a measure used by the SEC since a 1946 Supreme Court decision that defines what is regulated as a security. Libra “is not a product, it’s a payment tool” that wouldn’t be actively managed, Marcus said. 

“The SEC doesn’t say if you’re a payment tool, you’re not an exchange-traded fund. The SEC says that if you have a security backed by other securities, you’re an exchange-traded fund,” said Rep. Jim Himes (D-Conn.).  


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