The U.S. Securities and Exchange Commission (SEC) has come under fire for a perceived lack of clarity regarding Ethereum (ETH). Paul Grewal, Coinbase's chief legal officer, disputed the SEC's position in a recent post regarding ) argued that there was no justifiable reason to refuse it. ).
Grewal pointed out several important points about Ethereum, including the widespread adoption of ETH. According to him, classifying ETH as a security could impact some US citizens.
The central argument is that ETH is a commodity, not a security. Grewal believes that Ethereum should not be classified as a security, which would make it subject to stricter SEC regulations.
Grewal cited statements from former SEC officials to support his argument. He highlighted comments from former SEC Director of Corporate Finance William Hinman, who previously declared that “ETH is not a security.” Grewal also noted that SEC Chairman Gary Gensler himself publicly stated that “ETH is not a security” before taking office.
Grewal added that the Commodity Futures Trading Commission (CFTC) and federal courts have consistently classified ETH as a commodity. He said ETH futures contracts traded on CFTC-regulated exchanges demonstrate that the regulatory acceptance of ETH as a commodity is established.
This has raised concerns about a potential conflict between the SEC and CFTC. Some analysts have previously warned that if the SEC classified ETH as a security, it could directly contradict the CFTC's position.
Grewal further argued that the Howie Test, a legal framework used to identify investment contracts, does not apply to determining ETH's status as a commodity. He believes that even with the merger, a major update to Ethereum that moves the network to proof-of-stake, ETH will not meet the criteria for an investment contract under the Howie test.
Despite the SEC's unclear stance on ETH, Grewal believes the SEC has no legitimate reason to deny the application for a Spot Ethereum ETF.
News of an investigation into the Ethereum Foundation by undisclosed “state authorities” casts a shadow on the already uncertain fate of the Spot Ethereum ETF. ETH's legal status is in dispute, and the investigation could further complicate the SEC's decisions on several pending ETF applications.
Details of the SEC's investigation into the Ethereum Foundation remain unclear. It is unclear whether the SEC is an anonymous agency involved, and even if it is, the purpose of the investigation remains unconfirmed.
Coinbase's Paul Grewal is not the only one advocating for Ethereum to be classified as a commodity. Ripple CEO Brad Garlinghouse recently claimed in a post that the SEC is “losing badly” in the legal battle over Ethereum, and that the company falls short of international regulatory standards.
The SEC postponed decisions on several spot Ethereum ETFs, including Grayscale's Ethereum Futures Trust ETF, which was postponed again on Friday. Other major issuers such as ARK Invest, VanEck, BlackRock, and Fidelity are also awaiting the SEC's green light for their proposed Ethereum ETFs.
The latest update from Bloomberg ETF analysts paints a bleak picture for hopeful investors awaiting approval for the Spot Ethereum ETF. Their revised estimate puts the chance of approval in May at just 35%, significantly lower than their prediction for Spot Bitcoin ETF approval.
Adding to the uncertainty, two U.S. senators earlier this month sent a letter to SEC Chairman Gary Gensler urging him to reject the introduction of new crypto ETFs. Meanwhile, Gensler remains tight-lipped on the matter.
