Despite the SEC’s approval of an Ethereum ETF, questions still remain about whether ETH is a security, lawyers say.

Approved in-kind by the U.S. Securities and Exchange Commission Ethereum ETH

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Last week, some products left us with questions like: Is Ethereum now a necessity? The answer is still unclear.

It is unclear whether the SEC has jurisdiction over Ethereum. The agency’s chairman, Gary Gensler, did not explicitly state that Ethereum is a security. but, Consensis A cryptocurrency company filed a complaint against the agency last month, alleging that the agency treated ether as a security.

Meanwhile, Rostin Behnam, chairman of the Commodity Futures Trading Commission, the SEC’s sister agency, argued that ether is a commodity.

This is provided by SEC. Approved 19b-4 forms for eight Ethereum ETFs on Thursday, but issuers must ensure S-1 registration statements are effective before trading begins. Legal circles have differing views on whether the SEC’s approval of an Ethereum ETF signals change.

“I think this is a watershed moment in the long-running debate about the status of Ethereum (ETH),” Paul Grewal, Coinbase’s chief legal officer, told The Block on Friday. “For too long, the SEC has been hiding its position on whether Ethereum is a security, non-security, commodity, or something else.”

Grewal argued that a certain percentage of the fund’s assets may be securities because the issuer used Form S-1.

“By designating S-1 as an elective registration, what the SEC is saying is that, by definition, these funds will not contain assets that hold more than 40% of their portfolio in securities,” Grewal said.

“There is no way to prove to any other conclusion that ETH is not a security,” Grewal added.

The SEC did not immediately respond to a request for comment.

Others, including Coy Garrison, a former advisor to SEC Chairman Hester Peirce, have also said ETH should become a commodity following the approval of a spot Ethereum ETF.

In an email to The Block, Garrison said that the SEC’s approval order confirms that ETH is a commodity. In the SEC Bespeak Once an Ethereum product is approved, the funds will be referred to as “commodity-based trust shares.”

“If ETH were a security, approval would not have been appropriate under these specific trading rules,” Garrison said. Garrison is now a partner at Steptoe LLP.

Warning about the state of the ether

The SEC could still say that Ethereum is a security, Coinbase’s Grewell and others said.

“Even with an approval order, the SEC can always assert that the specific facts and circumstances surrounding the manner in which ETH is offered and sold in a particular transaction constitute an offering of securities,” Garrison said in an email to The Block.

The SEC’s approval order does not mean the agency has decided how to classify ETH, Ashley Ebersole said. General Counsel of 0x Labs. The former SEC lawyer added that the SEC could still say that Ethereum is a future security.

“I think they (the SEC) will say that just because I accepted this description of ETH during the ETF process doesn’t mean anything to whether I can later determine whether it is a commodity or a security,” Ebersole said.

Martin Auerbach, a lawyer at Withersworldwide, pointed out that the contents of an ETF do not have to be securities, citing gold-backed ETFs as an example. Auerbach confirmed that the SEC is still open to calling ETH a security.

“The SEC could have approved ETFs for trading as securities without explicitly saying that they were securities or commodities, as ETH has often suggested,” Auerbach said.

Finally, to further complicate matters, ether may or may not be a commodity, but the classification of staked ether is likely a completely different matter.

In recent years, the SEC has filed several lawsuits and reports. Regarding pending enforcement actions offering staked ETH or even ETH only. Tokens staked through third parties may be classified separately from Ethereum. According to a new report from Galaxy Digital Holdings, a cryptocurrency-focused financial services company, under these legal actions, staked Ethereum is likely to qualify as an investment contract and become a security.

So the picture of the state of the ether is becoming clearer, but it is still far from clear.

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