Ripple CEO Brad Garlinghouse has expressed his belief that the U.S. Securities and Exchange Commission (SEC) will ultimately fail in its attempt to classify Ethereum (ETH) as a security, just as it did with XRP.
Garlinghouse took to the X platform to address reports that the SEC is pursuing legal action to categorize ETH as a security. He emphasized that the SEC has a track record of losing legal battles against the crypto industry.
He also noted that since the SEC has been unsuccessful in its efforts to regulate the industry, it is now turning to legal disputes with its sister agency, the U.S. Commodity Futures Trading Commission (CFTC).
Garlinghouse posed a rhetorical question, asking when the SEC will realize that it cannot win the fight to classify ETH as a security, just as it failed with XRP.
The Ripple CEO made these comments in response to a statement by Coinbase’s Chief Legal Officer, Paul Grewal, who expressed support for Ethereum and presented arguments as to why ETH should not be considered a security.
It is worth noting that the SEC’s attempt to classify XRP as a security was unsuccessful. The SEC had tried to assert jurisdiction over XRP in 2020, accusing Ripple of offering the coin as an unregistered security to U.S. investors. However, in July 2023, U.S. District Judge Analisa Torres ruled that XRP is not a security.
Judge Torres also determined that most of the XRP-related transactions conducted by Ripple, including programmatic sales and other distributions, did not qualify as investment contracts, which are a specific type of security.
However, the SEC did achieve a significant victory when the court found that Ripple had violated the law through its institutional sales of XRP. The penalties for this violation will be addressed in the next phase of the case.
Meanwhile, the SEC has been striving to position itself as the primary regulator for the crypto industry since its attempt to classify XRP as a security failed. The commission has filed lawsuits against various exchanges, such as Binance and Coinbase, and has labeled several crypto assets, including SOL, MATIC, and ADA, as securities.
The recent attempt to categorize ETH as a security has surprised many crypto enthusiasts, considering that the SEC’s top officials had previously acknowledged that Ethereum does not fall under its regulatory jurisdiction. Former director of corporate finance, Bill Hinman, stated in a speech in 2018 that ETH is not a security.
Based on this acknowledgment, the CFTC has treated Ethereum, along with Bitcoin, as a commodity. As a result, ETH futures contracts are listed on CFTC-registered exchanges, including the Chicago Mercantile Exchange (CME).
If the SEC succeeds in classifying ETH as a security, it would likely delay the launch of a spot-based Ethereum exchange-traded fund (ETF). Many investors had hoped that the SEC would approve an ETF for Ethereum this year, following its approval of a Bitcoin ETF in January. However, the likelihood of an Ethereum ETF launching in May is diminishing as the SEC seeks to exert regulatory control over ETH.
Disclaimer: This article provides information and should not be considered financial advice. The views expressed in this article are the author’s personal opinions and do not necessarily reflect the opinion of The Crypto Basic. Readers are advised to conduct their own research before making any investment decisions. The Crypto Basic is not responsible for any financial losses incurred.