The Securities and Exchange Commission (SEC) may soon classify Ethereum ETH as a security. This move could impact several spot Ethereum ETFs applications. Noted digital asset lawyer Scott Johnsson raised this issue on May 14. The SEC is set to make decisions on VanEck and ARK Invest/21Shares’ applications by May 23 and 24, respectively. Applications from BlackRock, Fidelity, and Grayscale are also pending.
In March, the SEC flagged potential disapproval of BlackRock’s application. The question of whether Nasdaq filed its proposal correctly under Commodity-Based Trust Shares rules was central. Scott Johnsson suggested this query hints at a broader strategy.
“The obvious purpose is to potentially deny on the basis that these spot filings are improperly filed as commodity-based trust shares and do not qualify if they are holding a security,”
Implications for Ethereum ETFs
The SEC’s potential classification of Ethereum as a security could disrupt the approval of Ethereum ETFs. This has led to diminishing optimism among market participants. Matthew Sigel, head of digital assets research at VanEck, expressed skepticism about approval before the election, even joking he would eat his HODL hat if it happened.
Terrence Yang, a managing director at Swan Bitcoin, doubted the SEC would explicitly label Ethereum as a security. He cited political reasons, noting the tension in the crypto regulatory landscape. However, the recent lawsuit by Consensys alleging the SEC’s internal view of Ethereum as a security adds another layer of complexity. This lawsuit, filed last month, seeks a federal judge’s declaration that Ethereum is a commodity.
The SEC approved spot Bitcoin ETFs in January, after years of rejection over concerns of fraud and market manipulation. This approval raised hopes for Ethereum ETFs, but recent developments have tempered expectations. On the blockchain-based prediction platform Polymarket, traders estimated a mere 16% chance of ETF approval this month.
Political and Legal Considerations
The political environment around crypto regulation has grown increasingly tense. SEC Chair Gary Gensler’s stance on Ethereum ETH remains unclear, despite his public affirmation of Bitcoin as a commodity. In March, Gensler avoided direct answers about Ethereum’s regulatory status.
Rep. Patrick McHenry, Chairman of the House Financial Services Committee, accused Gensler of misleading Congress on this issue. This accusation followed revelations that the SEC internally viewed Ethereum as a security for over a year. McHenry’s comments reflect the growing political pressure on the SEC.
If the SEC denies the Ethereum ETFs applications, it may face legal challenges. Yang predicted that such a move would prompt lawsuits and political attacks. The well-funded crypto industry has significant lobbying power, which could influence the regulatory outcome.
Ethereum ETH Market Overview and Technical Levels
Ethereum, the second-largest cryptocurrency by market cap, reached a 52-week high of $4,088 on March 12, 2024. Its low was $1,500 on August 17, 2023. Currently, Ethereum is trading at $2,988.17, with a market cap of $348.10 billion.
On the daily chart, Ethereum ETH faces resistance at $3,041.54, the upper Bollinger Band. Key support is at $2,817.89, the lower Bollinger Band. Further resistance is seen at $3,237.58 (0.786 Fibonacci retracement) and $3,683.98 (1.618 Fibonacci extension).
Despite regulatory uncertainties, Ethereum’s year-over-year gain of 60.05% shows strong investor interest. The SEC’s potential classification of Ethereum ETH as a security could affect short-term movements. However, Ethereum’s significant trading volume of $12.97 billion in the past 24 hours reflects continued market confidence.
Add a Comment