SEC's Approval of Ether ETFs Fuels Debate on Commodity vs. Security Classification
Summary:
The US Securities and Exchange Commission's (SEC) approval of Ether (ETH) exchange-traded funds (ETFs) appears to classify Ether and similar tokens as commodities, not securities. This includes tokens from other projects. However, the SEC may still scrutinize those involved in Ether staking. Despite this, an official statement from the SEC on Ether's classification is expected soon. The SEC has already approved spot Ether ETF applications from multiple firms, with others awaiting authorization of their S-1 registration statements prior to launching.
The green light for Ether (ETH) exchange-traded funds may be seen as an "indirect affirmation" by the US Securities and Exchange Commission that Ether and similar tokens are not securities but commodities. With the SEC's approval of these funds, it seems to suggest that they will not classify Ether as a security, as stated by Bloomberg ETF analyst James Seyffart during his conversation on the Bankless podcast with Ryan Sean Adams. Justin Browder, a digital asset lawyer, further asserts that if Ether ETFs receive S-1 approval — the last requirement for trading commencement — it definitely concludes that “ETH is not a security”.
Further extending this viewpoint, Adam Cochran from venture capital firm Cinneamhain Ventures posits that this logic could also apply to tokens from other projects. “Since ETH is being considered a commodity, it paves way for numerous other project tokens to be seen in similar light, thus redefining their categories. This implies that many more commodities have emerged today than we currently perceive,” he claims.
Nonetheless, Seyffart and other observers maintain that the SEC might continue to scrutinize entities engaged in Ether staking. “It's feasible that the SEC will separate the two, refraining from calling ETH a security but claiming staked ETH might fall under such a category [...] I don't believe they'll likely relinquish this stance anytime soon," Seyffart adds. Digital asset attorney Joe Carlasare concurs with Seyffart, stating, “Even with the introduction of the ETF, the SEC might legally challenge individual users and staking services. Any other actions, in my opinion, are improbable.”
In April, Ethereum infrastructure corporation Consensys received a warning note from the SEC, primarily concerning Metamask's trading and staking services. Securing finance attorney Scott Johnsson also pointed out that the SEC approval order did not expressly label Ether as non-security, rather it avoided addressing the issue directly. Nonetheless, an official statement by the SEC and its commissioners is anticipated in the near future.
The SEC formally granted approval for spot Ether ETF applications to VanEck, BlackRock, Fidelity, Grayscale, Franklin Templeton, ARK 21Shares, Invesco Galaxy, and Bitwise on May 23. Hashdex was the only ETF issuer that didn’t receive approval. The eight approved firms are now waiting for the SEC to authorize their S-1 registration statements prior to rolling out these offerings.
Published At
5/24/2024 3:11:47 AM
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