Spot Ether ETF Approval Proves ETH is Not a Security, Experts Say

Ruholamin Haqshanas

Last updated:

May 24, 2024 03:20 EDT | 2 min read

The recent approval of spot Ethereum exchange-traded funds (ETFs) by the United States Securities and Exchange Commission (SEC) potentially confirms Ether’s status as a non-security, according to industry experts.

Bloomberg ETF analyst James Seyffart, speaking on the Bankless podcast with Ryan Sean Adams, emphasized that the approval of these commodity-based trust shares implies that the SEC explicitly recognizes Ether as not being a security.

Seyffart further suggested that this recognition could extend to other tokens as well, solidifying their classification as commodities.

S-1 Approval Would End Debate for ETH Status

Digital asset lawyer Justin Browder echoed Seyffart’s sentiment, stating that if Ether ETFs receive S-1 approval, which is the final requirement for them to begin trading, it would settle the debate once and for all, affirming that ETH is indeed not a security.

This is a key point. The reason the approval of the spot ETH ETFs is a clear indication that the SEC does not consider ETH a security is because funds whose assets are 40% or more securities may not register through a Form S-1; rather, they are considered investment companies and…

— TuongVy Le 🗽🔭🍕🦄 (@TuongvyLe12) May 23, 2024

Adam Cochran, a partner at venture capital firm Cinneamhain Ventures, took the argument a step further, suggesting that this line of thinking could be applied to tokens of other projects as well.

“ETH is a commodity, even with its current attributes. That means we can extrapolate to *A LOT* of other projects what elements matter in security,” Cochran said.

“Today a lot of things probably clearly became commodities, even if they don’t know it yet.”

While the approval of spot Ether ETFs reinforces the non-security status of Ether, Seyffart and other experts anticipate that the SEC may still focus on actors involved with staking Ether.

Seyffart speculates that the SEC might distinguish between Ether itself, which they would not consider a security, and staked Ether, which could potentially fall under the definition of a security.

Digital asset lawyer Joe Carlasare shares this view, suggesting that the SEC could pursue individual actors and staking-as-a-service despite the ETF launch.

It’s worth noting that the SEC’s approval order did not explicitly confirm Ether’s non-security status, leading finance lawyer Scott Johnsson to comment that the issue was “completely sidestepped.”

However, an official statement from the SEC and its Commissioners is expected to provide more clarity in the future.

SEC Approves 19b-4 Applications

On May 23, the SEC officially approved 19b-4 applications from VanEck, BlackRock, Fidelity, Grayscale, Franklin Templeton, ARK 21Shares, Invesco Galaxy, and Bitwise for issuing spot Ether ETFs.

Notably, several ETF issuers removed staking from their final amendments.

Hashdex was the only issuer that did not receive regulatory approval on that day.

However, all eight approved ETF issuers must await the SEC’s approval of their S-1 registration statements before launching their ETFs.

Bloomberg ETF analyst James Seyffart predicts that the S-1 approvals could be granted in a “couple of weeks,” although he acknowledges that the process may take longer, typically spanning up to five months.

However, fellow Bloomberg ETF analyst Eric Balchunas believes that a mid-June launch is certainly possible.

As reported, Singapore-based QCP Capital believes the approval of spot Ethereum ETFs in the United States could potentially trigger a substantial rally of up to 60% in the price of ETH.

Follow Us on Google News