Commodity Nod for Ethereum in ETF Saga Won’t Halt SEC’s War on Crypto

Industry experts and executives have been discussing the implications of the SEC’s apparent U-turn on Ethereum.

Its approval of spot Ether ETFs on May 23 may be a signal that the regulator now views the asset as a commodity and not a security.

The regulator officially approved 19b-4 applications from VanEck, BlackRock, Fidelity, Grayscale, Franklin Templeton, ARK 21Shares, Invesco Galaxy, and Bitwise to issue spot Ethereum ETFs.

However, not all are convinced this is also a signal that its war on crypto could be coming to an end any time soon.

As of today, you can update your bio to “commodities trader” and no longer have to sheepishly say “crypto” when your date asks about your job.

— Adam Cochran (adamscochran.eth) (@adamscochran) May 23, 2024

ConsenSys Not Convinced

On May 24, Ethereum software solutions provider ConsenSys said it welcomes the decision as a step in the right direction but added:

“This seemingly last-minute approval is yet another example of the SEC’s troublesome ad hoc approach to digital assets.”

The company noted that the SEC’s “regulatory abuse” is “unfair to market participants, antithetical to the rule of law, and handcuffing innovation.”

On today’s SEC ruling:

While Consensys welcomes today’s decision to approve ETH Spot ETFs as a step in the right direction, this seemingly last minute approval is yet another example of the SEC’s troublesome ad hoc approach to digital assets. No other industry, market, or…

— Consensys (@Consensys) May 23, 2024

ConsenSys is one of several crypto companies embroiled in legal battles with the SEC, which maintains its position that they have been offering unregistered securities. The agency’s decision on Ethereum is “contrary to the position it continued to take prior to the events of this week,” said ConsenSys.

Meanwhile, financial services lawyer James Murphy said that “the SEC is in deep trouble with some of its crypto cases in light of its determination that ETH is a commodity.”

The regulator has argued repeatedly at the hearing on Coinbase’s motion to dismiss that crypto tokens that operate within an “ecosystem” are securities, he added. The exchange’s chief legal officer, Paul Grewal, echoed the sentiment in a post on X on May 24, questioning the SEC’s perplexing U-turn.

According to @secgov, an “ecosystem” without any contract or undertaking can qualify token transactions as securities. But that same SEC has now effectively said that ETH sales can’t be securities because ETH ETFs may be registered by funds with an S-1. So ETH must not have an…

— paulgrewal.eth (@iampaulgrewal) May 24, 2024

More Smoke and Mirrors

Finance lawyer Scott Johnsson observed that the SEC “completely sidestepped” the clarification of ETH in its approval orders. ETF Store President Nate Geraci said something similar on May 24.

“Zero statements from SEC Commissioners on spot eth ETFs… Silence speaks volumes.”

Meanwhile, crypto lawyer Jake Chervinsky was optimistic that a change was in motion:

“Today’s expected ETH ETF approval will hopefully provide a clue as to how real this pro-crypto pivot might be.”

ETH prices spiked to $3,933 when the news broke but returned to yesterday’s levels shortly after and were trading at $3,670 at the time of writing.