On Thursday, the United States Securities and Exchange Commission (SEC) issued a historic decision by approving eight spot Ethereum exchange-traded funds (ETFs) from leading financial institutions and crypto companies, including Grayscale, Bitwise, BlackRock, and ARK. This historic approval, which consolidated proposals from Nasdaq, NYSE and CBOE, marked a significant shift in the regulatory landscape for digital assets.
Why the SEC is in “deep trouble” with its crypto business
However, this move comes with complexities, especially in light of ongoing legal challenges regarding the classification of other cryptocurrencies. Prominent crypto lawyer James “MetaLawMan” Murphy commented“I think the SEC is in big trouble with some of its crypto cases in light of its determination that ETH is a commodity.”
He pointed out that the SEC has repeatedly argued in the Coinbase case “that cryptographic tokens that operate within an ‘ecosystem’ are securities.” I think the SEC will have a hard time explaining how ETH, which operates within a giant ecosystem, is a commodity, but SOL and ADA are securities when traded on Coinbase.
This statement sums up the heart of the matter: Ethereum operates within a robust ecosystem that includes not only investing and trading, but also decentralized applications and smart contracts, similar to other blockchains like Solana and Cardano. The distinction made by the SEC could complicate its position in ongoing and future litigation, particularly in cases involving other cryptocurrencies that operate under similar paradigms but are classified differently.
Murphy also suggested possible legal maneuvering by the involved parties: “Coinbase is expected to file a response to its motion to certify an interlocutory appeal tomorrow. It wouldn't surprise me if they also filed a request for a rehearing of their motion to dismiss, given that the SEC now admits that ETH is a commodity.
He also references Judge Failla's earlier decision in the Coinbase case, in which she agreed with the SEC's argument regarding the ecosystem and used it as the basis for her decision. “When a customer purchases a token on the Coinbase platform, they are not just purchasing a token, which in itself has no value; rather, it adheres to the digital ecosystem of the token, the growth of which is necessarily linked to the value of the token.
Consensys, a major Ethereum software developer, has also expressed concerns about the SEC's decision-making process, suggesting that it reflects an inconsistent and ad hoc approach to regulating digital assets. In a statement, the company said: “This seemingly last-minute approval is another example of the SEC’s difficult ad hoc approach to digital assets. No other sector, market or asset is subject to such deliberate regulatory abuse. It is unfair to market participants, contrary to the rule of law and handcuffs innovation.
On today's SEC decision:
While Consensys welcomes today's decision to approve ETH Spot ETFs as a step in the right direction, this seemingly last-minute approval is another example of the SEC's tough ad hoc approach to digital assets. No other industry, market or…
–Consensys (@Consensys) May 23, 2024
Sam Callahan, principal analyst at Swan, note a key omission in the SEC approval document: “Interesting paragraph in the SEC's Ethereum ETF approval document. The SEC basically looked at ETF products and whether they could adequately protect investors and maintain fair markets, and that was it. No mention of securities laws or ETH classification. No mention of Howey test.”
Thus, the lack of a clear position on Ethereum's classification under securities laws still raises questions about future regulatory challenges and their implications for other digital assets. “We may have to wait for a statement from Genslerand even then he could skirt the subject altogether,” Callahan remarked.
At press time, ETH was trading at $3,686.
![Ethereum Price](https://bitcoinist.com/wp-content/uploads/2024/05/ETHUSD_2024-05-24_08-27-53.png?resize=1024%2C473)
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