The crypto world is holding its breath as rumors swirl that the Securities and Exchange Commission may be gearing up to classify Ethereum as a security. According to Fox Business journalist Eleanor Terrett, if Fortune Magazine’s reporting proves accurate, the SEC could be taking a hard look at Ethereum’s proof-of-stake model and its 2014 initial coin offering (ICO).
Back in 2018, the SEC seemed to give Ethereum a free pass, with top official Bill Hinman declaring that neither Bitcoin nor Ether qualified as securities. But newly released emails reveal that this stance came after SEC brass huddled with Ethereum founder Vitalik Buterin to discuss the Ethereum Foundation’s role. Critics argue the SEC may have jumped the gun by greenlighting Ether before fully vetting concerns over its ICO.
That ICO issue is now front and center, with New York Attorney General Tish James citing it as grounds to treat Ether as an unregistered security in her lawsuit against crypto exchange KuCoin. If the SEC follows James’ lead, it could open a Pandora’s box of regulatory headaches for Ethereum and its founders.
The SEC’s deafening silence on approving ETH spot ETFs has some, like Terrett, wondering if Gary Gensler & Co. are deliberately stalling as they sort through any lingering Ether probes behind closed doors. The agency may want all its ducks in a row before giving the green light to funds tracking the second-biggest crypto.
Defense Of Ethereum’s Status
On the flip side, Coinbase chief legal eagle Paul Grewal has gone to bat for Ethereum’s commodity status in a Twitter thread. Grewal insists the SEC has repeatedly endorsed that position over the years, including from Gensler himself before he became chair. He accuses the agency of peddling “misinformation” and argues classifying Ether as a security would defy legal precedent and utterly fail the famous Howey investment contract test.
With tensions ratcheting up, the SEC’s eventual Ether ruling could be a make-or-break moment for the wider crypto market. An aggressive enforcement crackdown targeting Ethereum over its fundraising model could spook innovators and stifle the next wave of blockchain-based finance. However, reaffirming ETH’s commodity status would provide welcomed regulatory clarity as adoption goes mainstream. The sector’s future path lies in the SEC’s hands.
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