Coinbase’s Chief Legal Officer, Paul Grewal, has voiced his concerns regarding recent reports suggesting that the U.S. Securities and Exchange Commission (SEC) is attempting to classify Ethereum (ETH) as a security. Grewal hopes that the SEC does not create reasons to question Ethereum’s regulatory status as a non-security, in order to deny the numerous ETH spot exchange-traded fund (ETF) applications.
The SEC has allegedly requested important documents and financial records from several U.S. crypto-related businesses regarding the Ethereum Foundation, as part of its ongoing investigation. While the SEC has not confirmed or denied these reports, the crypto community sees this as a potential obstacle that could impact the launch of spot Ethereum ETFs.
Notably, asset managers such as BlackRock and Fidelity Investments have already filed applications to launch Ethereum funds in the United States. Despite the SEC delaying its decision on some of these ETF applications, experts still believe that at least one filing will be approved by May.
However, if the SEC does classify ETH as a security, the chances of an Ethereum spot ETF launching by May could be reduced. Grewal argues that the SEC lacks a valid reason to deny these spot-based ETH ETF applications and hopes that the commission does not create any fabricated justifications to question Ethereum’s established regulatory status as a non-security.
Grewal points out several factors that demonstrate that Ethereum is not a security. He mentions that the SEC has consistently stated that ETH is a commodity, allowing millions of Americans to hold the coin since its inception in 2015. He also highlights how senior SEC officials, including former Director Bill Hinman and Gary Gensler, have classified Ethereum as a non-security. Additionally, Grewal references how the SEC’s lawyers compared ETH to Bitcoin in the commission’s lawsuit against Ripple, as both the CFTC and the SEC agree that Bitcoin is a commodity.
Furthermore, Grewal argues that Ethereum does not meet all the requirements of the Howey Test, a well-known U.S. securities test. He asserts that Ethereum does not involve a contractual obligation related to a business enterprise and that the introduction of the Merge upgrade does not automatically classify ETH as a security. The Merge, implemented in 2022, facilitated Ethereum’s transition from a Proof-of-Work to a Proof-of-Stake algorithm.
Based on these facts, Grewal concludes that Ethereum is not a security and that the SEC has no valid grounds to deny the multiple applications for ETH spot-based ETFs.
Disclaimer: This article provides information and should not be considered financial advice. The opinions expressed in this article are solely those of the author and do not reflect the views 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.
