The United States Securities and Exchange Commission (SEC) seemed to have a weak case in proving that Ether is a security, as revealed on June 19, 2024, when the SEC unexpectedly closed its investigation into Ether (ETH) as a security. Laura Brookover, a lawyer from Consensys, declared that the SEC would no longer claim that Ether is a security. Brookover suggested that the SEC’s decision to end the investigation was influenced by Consensys’ push to lift the subpoenas, especially after the approval of ETH exchange-traded funds (ETFs) based on Ether being classified as a commodity.
Consensys’ letter to the SEC highlighted that the approval of spot Ether ETFs indicated a shift in the SEC’s position, categorizing ETH as a commodity rather than a security. Despite this, Carol Goforth, a professor at the University of Arkansas School of Law, cautioned that the approval of an ETF does not automatically mean that Ether is a commodity, as there are ETFs with commodities as underlying assets that are not considered commodities.
The reasons behind the SEC’s decision to halt the investigation into Ethereum remain unclear. Goforth suggested that the SEC might have retreated because it was doubtful about convincing a court that ETH is a security, given the widespread ownership and trading of the asset, as well as the influence of market forces on profitability. The speech by former SEC director William Hinman in 2018 also indicated that Ethereum was not a security due to its decentralization.
While the crypto industry may rejoice at the SEC’s decision to drop the investigation, Goforth warned that it is too early to declare victory, as uncertainties persist regarding the classification of most crypto assets. Consensys celebrated the development but acknowledged that the battle is far from over, especially with the SEC scrutinizing staking in the Ethereum ecosystem.
The ongoing struggle for a clear regulatory framework in the U.S. crypto industry continues, with recent developments offering Ethereum advocates some relief from the uncertainties surrounding Ether’s classification. However, challenges remain, as evidenced by Kraken’s settlement with the SEC and Coinbase’s willingness to take legal action if necessary over staking services. The future of crypto regulation in the U.S. remains uncertain, despite these temporary victories.