Is Ethereum Facing Potential Security Declaration by the SEC Next Week?
Speculations arise as the Securities and Exchange Commission (SEC) considers declaring Ethereum a security, according to a digital assets lawyer. The SEC is expected to reject several spot Ethereum ETF applications, with VanEck’s proposal being decided on May 23 and ARK Invest/21Shares’ application deadline on the following day. Other prominent firms, including BlackRock, Fidelity, and Grayscale, also have applications pending with the SEC.
In March, the SEC raised concerns regarding BlackRock’s application and Nasdaq’s proposal to list BlackRock’s product, questioning whether the proposal was adequately filed as Commodity-Based Trust Shares. This raised eyebrows, with industry insiders suggesting that the SEC might use these grounds to deny ETF filings as commodity-based trust shares, thereby insinuating that Ethereum is a security.
While it is possible for the SEC to explicitly label Ethereum as a regulated security in its ETF denials, industry experts believe it is highly unlikely. Terrence Yang, a managing director at Swan Bitcoin, argues that SEC Chair Gary Gensler and his team are experienced politicians who are cautious about making a move that could attract criticism from crypto-friendly politicians.
After the SEC approved spot Bitcoin ETFs in January, optimism for spot Ethereum ETFs has dwindled. Traders on the prediction platform Polymarket currently predict a pessimistic 16% chance of ETF approval this month.
While Gensler has acknowledged Bitcoin as a commodity, he has refrained from commenting on Ethereum’s regulatory status. In fact, the Ethereum software company Consensys has alleged in a lawsuit that the SEC internally views Ethereum as a security. Consensys has requested a federal judge in Texas to officially declare Ethereum as a commodity.
It is worth mentioning that the SEC previously denied Bitcoin ETF applications for a decade, citing concerns of fraud and market manipulation. However, a federal appellate court overturned this decision, leading the SEC to approve Ethereum futures ETFs last October. If the SEC were to point to market manipulation as a reason to deny ETFs again, experts suggest that similar legal challenges and political backlash could follow.
In conclusion, while there is speculation regarding Ethereum’s potential security declaration by the SEC, it remains uncertain whether such a decision will be made next week.