The recent approval of spot Ethereum ETFs by the U.S. Securities and Exchange Commission (SEC) has ignited a debate: is Ether (ETH) now a commodity? The answer, unfortunately, remains shrouded in some ambiguity.
The confusion stems from conflicting stances from different regulatory bodies. While the SEC’s sister agency, the Commodity Futures Trading Commission (CFTC), has explicitly labeled ETH a commodity, the SEC itself has maintained an elusive position on the matter.
Complicating things further, Chairman Gary Gensler has never explicitly declared ETH a security, although crypto firm Consensys alleges the agency has viewed it as such in a recent complaint..
Is Ether ETH)a security?
Legal experts offer divided opinions on whether the ETF approval signifies a shift in classification. Coinbase’s Chief Legal Officer, Paul Grewal, views it as a “watershed moment,” arguing that the SEC wouldn’t have allowed ETFs with a significant portion (over 40%) of securities in their portfolio. This, he asserts, implies ETH is not a security.
Others, like Coy Garrison, former counsel for SEC Commissioner Hester Peirce, echo this sentiment. They point to the SEC’s order referencing the funds as “commodity-based trust shares,” suggesting approval wouldn’t be possible if ETH were a security.
However, a caveat remains. The SEC still holds the power to classify ETH as a security later. Both Grewal and Garrison acknowledge this possibility, highlighting loopholes that allow the agency to potentially change its stance based on specific transactions or offerings of ETH.
Further muddying the waters, Ashley Ebersole, general counsel at 0x Labs, points out that the SEC’s approval doesn’t necessarily equate to a definitive categorization. The agency could still label ETH a security in the future.
Adding another layer of complexity, the classification of staked ETH is likely a separate issue altogether. Recent SEC actions suggest staked ETH, especially when staked through a third party, could be considered an investment contract and therefore a security.
While the recent approval clarifies things to an extent, the question of whether ETH is a commodity or a security remains unanswered. The SEC’s opaque stance leaves investors and the crypto industry in a state of uncertainty. Only time will tell if further regulatory pronouncements will bring much-needed clarity to the classification of Ether.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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