• 30 May, 2024

SEC Considers Classifying Ethereum as a Security Amid BlackRock’s ETF Delay

The SEC is contemplating whether Ethereum should be classified as a security. This evaluation arises from BlackRock’s filing related to its spot Ether ETF. Analyst Scott Johnsson reviewed BlackRock’s March 4 submission, revealing the SEC’s intention to delay the decision until June. The filing calls for public feedback on whether the ETF should be treated as a commodity.

Scott Johnsson noted that the SEC’s question regarding Ethereum’s classification was unprecedented. Such scrutiny had not been applied to Bitcoin ETFs. He highlighted that this could lead to the denial of the spot Ether ETF if Ethereum is deemed a security. 

The SEC, under 15 U.S.C. 78s(b)(2)(B), must provide grounds for potential disapproval. This inquiry indicates that Ethereum’s classification is central to the SEC’s decision-making process.

Eric Balchunas from Bloomberg echoed Scott’s sentiments as he spoke further about the SEC’s filing. He mentioned that the SEC asked whether the Ether ETF proposals were correctly filed as commodities. 

Balchunas believes the SEC might consider Ethereum a security to justify a denial. He remarked that the chances of approval remain slim, emphasizing Johnsson’s significant findings hidden within complex legal documentation.

Ric Edelman, head of the Digital Asset Council of Financial Professionals, discussed the matter in a CNBC Television interview. Edelman focused on the broader outcome of the regulatory body’s decision. He explained that ETH’s category would determine which regulatory body oversees it. Like BTC, the matter revolves around whether ETH should be deemed similarly as a commodity or a security.

The SEC has historically been cautious with cryptocurrency ETFs. When Bitcoin ETFs faced initial denials, issuers argued that approval of Bitcoin futures set a precedent for spot ETFs. This argument could influence Ethereum’s case. While the SEC might deny the current application, it suggests a possibility of future approval once regulatory issues are resolved.

Public feedback on Ethereum’s classification is crucial. The decision will dictate if Ethereum remains under the Commodity Futures Trading Commission or falls under the SEC’s jurisdiction. The final decision, expected by May 23, is highly anticipated. Experts like Balchunas remain skeptical about immediate approval, noting the SEC’s tendency to delay such decisions.

The outcome of this classification debate will significantly impact the crypto and financial markets. The SEC’s stance will shape the regulatory landscape and the future of cryptocurrency investments. The industry awaits the SEC’s decision on BlackRock’s spot Ether ETF application, understanding its broader implications.

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