Cryptocurrency lawyer James Murphy, known as MetaLawMan, believes the United States Securities and Exchange Commission (SEC) has gotten into trouble following its approval of spot exchange-traded funds (ETFs) for the Ethereum network.
In an X post, Murphy said the SEC is in “deep trouble” with its lawsuits against some crypto firms because the agency’s approval of the Ethereum ETFs finalized the debate of ether (ETH) being a commodity.
The SEC in Deep Trouble
On May 23, the SEC officially greenlit the launch of eight Ethereum ETFs from asset managers, including Fidelity, BlackRock, Ark Invest/21Shares, Franklin Templeton, VanEck, and Invesco/Galaxy Digital.
A week ago, crypto community members and market experts placed the odds of the approvals at 25% due to the SEC’s anti-crypto stance. However, the market witnessed a surprising turn of events this week, with analysts increasing the odds to 75%.
While the SEC has persisted in its anti-crypto stance over the years, the agency has initiated legal battles against several American digital asset entities, accusing them of offering unregistered securities like ETH, Solana (SOL), Cardano (ADA), Ripple (XRP), Polygon (MATIC), and many other crypto tokens.
Murphy noted in his tweet that the securities agency argued repeatedly at a hearing in its lawsuit against the largest American crypto exchange, Coinbase, that crypto tokens operating within an ecosystem were classified as securities. Assets like ETH, SOL, ADA, and XRP fall into this category.
SEC to Faces Difficulty in Crypto Cases
Furthermore, the crypto lawyer revealed that U.S. District Judge Katherine Polk Failla, overseeing the SEC vs. Coinbase case, applied the agency’s ecosystem argument in her ruling. The order stated that customers buying tokens on Coinbase are not just acquiring the assets in their valueless form but purchasing the digital ecosystems, whose growth is tied to the tokens’ value.
Murphy believes the SEC would have a hard time explaining to U.S. courts how ETH is a commodity, but similar ecosystem tokens like SOL and ADA are not.
With Coinbase due to file a reply brief on its petition to certify an interlocutory appeal in the case soon, Murphy said it would be unsurprising if the exchange also filed a request for rehearing or its motion to dismiss the SEC’s case on the premise that the agency now recognizes ETH as a commodity. Worse still, other crypto firms with similar pending cases with the securities agency could use the same approach.
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