Ethereum Under SEC's Lens

Here we are, once again, with the famous debate resurging – is Ethereum a security or commodity?

According to reports, the U.S. Securities and Exchange Commission (SEC) seems to be investigating the Ethereum Foundation, raising questions about whether ETH should be classified as a security.

Ethereum Foundation (EF) group affiliates may be targeted by SEC issuance of subpoenas, which is most likely to influence the potential approval of Ether exchange-traded funds (ETFs).

It is certainly not the first time the SEC is on the haunt for targeting companies. The regulator has connected with three prominent US-based companies to collect documents and financial records against the EF to classify Ethereum as a security.

This investigation is not anything new, nor something we haven’t seen before.

In fact, it has been briefly going on after the merge happened back in 2022. That’s when ETH shifted from Proof-of-Work (PoW) to Proof-of-Stake (PoS).

• SEC head Gensler failed to answer the question regarding the classification of Ethereum.

• There is still no clear answer from the SEC on Ethereum as to whether it is a security or commodity.

• It is one of the factors delaying Ethereum Spot ETFs approval.

The SEC had been heavily reluctant to approve Bitcoin spot ETFs in the U.S. markets, but after being subjected to external pressure from both markets and analysts, it finally gave the green light to the product.

However, we do not necessarily think it is going to be the same for ETH ETFs.

Recommended Read: SEC Quells Down ETH ETF Amidst Bullrun

In a 2018 statement, Gary Gensler made a statement classifying Bitcoin, Ethereum, and others as “not securities” – but now seems to have changed his mind with no definitive answer.

The probability of a spot ETH ETF approval is reducing over time. Last month, analysts’ predictions were sitting at a 50% chance of approval by the SEC in May. But the more time passes, the lesser the chance with a current probability of 35%.

 

Is Gary Gensler to blame for the delayed approval?

Read More: Trouble in Gensler’s House?

While we can’t fully put the blame on one person, the delay in decision remains associated with Gary Gensler’s unclear decision about ETH being a security or commodity. The silence over this very specific topic points is alarming.

It has always been known that the SEC is not the biggest fan of cryptocurrencies. The ongoing drama with SEC over ETH ETFs is looking more severe over time, with a chance of rejection of the product.

It is important to note that the SEC has approved ETFs related to Ether futures, but the decision on whether to approve spot ETH ETFs is pending, with a resolution expected in May.

Not only this, but this move is seen as adding pressure on the regulator to clarify its position on digital asset securities, and aid firms in navigating potential regulatory liabilities in a clearer way.

Ethereum’s price has demonstrated strength in the face of potential bad news, but the overall situation in the crypto sector could nonetheless change.

At time of writing, ETH is trading at $3,654.03.