Paul Grewal, Coinbase’s Chief Legal Officer, recently responded to concerns and disinformation surrounding Ethereum (ETH) prior to a ruling on Ethereum Exchange-Traded Products (ETPs). The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have both classified Ethereum as a commodity, as Grewal underscored in reference to its widespread adoption. Senior SEC officials, such as former Chair Gary Gensler, have also testified in favor of this categorization, stating that Ethereum is not a security.
In a series of posts on X, Grewal referred to comments by Former SEC Director of Corporation Finance William Hinman, who had publicly stated that ETH is not a security. Grewal added that ETH does not satisfy the requirements of the Howey test to be classified as a security. He went on to emphasize Ethereum’s significance in the cryptocurrency ecosystem since its inception in 2015 and its listing on futures markets governed by the CFTC beginning in 2021.
The Coinbase executive appealed to the SEC to allow the progress of ETH ETP applications rather than imposing barriers that might question Ethereum’s regulatory classification. Such challenges could disrupt established precedents and potentially erode investor confidence. He also advocated for the preservation of the legal framework recognizing Ethereum’s status and added that “Americans deserve better.”
The SEC is currently reviewing Ethereum ETF applications from issuers, including Ark Invest, Hashdex, Grayscale Investments, and BlackRock Inc., and is taking its time to carefully consider these developments. The SEC’s cautious position is primarily driven by the need to definitively classify Ethereum as either a security or a commodity.
On Wednesday, March 20, the SEC delayed its decision on the VanEck spot Ethereum ETF, setting a new decision deadline for May 23, 2024. The recently disclosed SEC filing indicates the agency has granted additional time to thoroughly evaluate VanEck’s proposal. This extension aims to allow a comprehensive review of the proposed rule changes and address any concerns.
Bloomberg analyst James Seyffart has also suggested that the chances of approval for spot ether ETFs by May have diminished. He attributes this to the SEC’s apparent hesitance to engage with potential issuers, a stark contrast to the prior discussions that preceded the approval of spot bitcoin ETFs in January. Seyffart’s analysis suggests that without more proactive engagement from the SEC, the current round of spot ether ETF applications may face denial.
