Potential Ethereum Probe Could Shape SEC's Stance on Ether ETFs, Says Legal Expert
Summary:
Crypto lawyer Scott Johnsson speculates that the securities regulator may use a potential investigation into Ethereum and its foundation to deny Ether (ETH) ETFs without undermining ongoing lawsuits. This tactic could be to appease crypto market critics demanding stricter regulations. The probe could also be a strategy to dismiss spot Ethereum ETFs, with an objection based on non-correlation seen as a temporary solution. Johnsson also suggests the regulator could use the investigation to carefully deny spot Ethereum ETFs and avoid compromising its legal battles with Coinbase and Binance.
There's speculation that a potential investigation into Ethereum and the Ethereum Foundation could be a strategic move by the securities regulator to reject Ether (ETH) exchange-traded funds (ETFs), possibly appeasing critics without jeopardizing existing lawsuits, says cryptocurrency legal expert. On March 22, Scott Johnsson, finance lawyer and general partner of Van Buren Capital, shared his view on why the securities regulatory body might have initiated the possible investigation. Johnsson proposed that the move could be an effort to satisfy demands for stricter regulations from those skeptical of the crypto market.
Earlier this month, Democratic senators Jack Reed and Laphonza Butler urged Gary Gensler, head of the securities regulatory body, to halt further approvals of spot crypto ETFs. Senator Elizabeth Warren has also openly voiced her objection to these investment products. Another suggestion, gaining popularity recently, is that the ongoing investigation could be a tactic used to reject spot Ethereum ETFs, as arguments against them based on non-correlation might not hold up. "The regulator needs a non-correlation-based objection to reject ETH spot ETFs this year," Johnsson commented.
Johnsson further explained that rejection of spot ETH ETFs based on correlation data could only offer a temporary fix as correlation levels improve over time. Correlation refers to the price difference between futures and spot markets, a key factor in the regulator’s decision to approve or reject crypto ETPs. Earlier this month, however, ETF analyst Eric Balchunas stated that the correlation between futures and spot isn't as strong and expressed his lack of optimism for ETH ETFs compared to BTC ETFs. Johnsson also speculated that the probe might allow the securities regulator to carefully reject spot Ethereum ETFs while not compromising its legal battles against Coinbase and Binance.
Back in June 2023, the securities commission accused Binance and Coinbase of selling unregistered securities, specifying 19 tokens, from which ETH was excluded. Gary Gensler, in a Bloomberg TV interview earlier this month, did not give a clear answer when questioned about ETH’s security status. Johnsson proposed that the regulator might end up adopting a milder strategy and state an ongoing review into ETH's securities status, rather than a concrete enforcement action. He voiced concerns that the securities regulator could use an investigation into ETH's security status to refuse approval.
With regard to the hypothetical investigation into Ethereum by the securities regulator, Coinbase's Chief Legal Officer Paul Grewal contended that the regulatory body has no valid reason to turn down the ETH ETP applications. He hopes that they won’t invent a reason by challenging the well-established regulatory status of ETH, which the regulatory body has repeatedly supported. On March 21, US Congressman Patrick McHenry criticized the regulatory body’s action against Ethereum, saying it contradicts the CFTC's assessment and the regulatory body’s previous actions. He added that Congress, not Gensler, should determine the jurisdiction and budget of the securities regulatory body.
Published At
3/22/2024 7:19:20 AM
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