Last month, the United States Securities and Exchange Commission (SEC) approved all applications for spot Ethereum Exchanged-Traded Fund (ETF). Before the commission’s decision, a group of pro-crypto lawyers sent a letter to Gray Gensler, the SEC’s chairman, urging him to not only consider approving the Ethereum ETFs but also the funds of other crypto assets.
On May 23rd, the SEC announced that it had approved eight applications for Ethereum ETF. Now, crypto lawyer Carlo D’Angelo says the SEC’s approval of Ethereum ETFs effectively makes ETH a commodity. He argues that Ethereum, the second-largest crypto asset by market capitalization, should be overseen by the Commodity Futures Trading Commission (CFTC) and not the SEC, which regulates securities.
The CFTC is tasked with regulating commodities and preventing fraud and market manipulation. According to D’Angelo, regulations adopted by the CFTC are less stringent than the SEC’s.
Who Should Regulate Crypto?
Over the last few years, there has been a heated debate over which commission should oversee the digital asset space. In 2021, CFTC ex-commissioner Dawn Stump said the court’s decision on the SEC’s enforcement action against XRP, a digital coin issued by Ripple, would help determine whether the SEC’s regulatory framework applies to digital assets. Last year, the court ruled that XRP isn’t a security, a decision that the SEC has disagreed with since then.
Perhaps the recent approval of a spot Ethereum ETF brings more regulatory clarity in the crypto space that many players have been calling for. If Ethereum and other leading crypto assets are not classified as securities, then Gensler’s SEC doesn’t have jurisdiction to oversee these digital assets under the US Securities Exchange Act of 1934 and Securities Act of 1933.
That means the Securities and Exchange Commission can no longer use the Howey Test to support its argument that digital assets are investment contracts. D’Angelo says crypto lawyers can now argue that digital coins like Ethereum are commodities, not investment contracts, which usually come with a promise of profits from others’ efforts.
Crypto Lawyer Says SEC’s Ethereum ETF Approval Contradicts Commission’s Legal Arguments
Crucially, the SEC’s acknowledgment of Ethereum as a commodity following the approval of ETFs may have undercut the commission’s legal arguments in various lawsuits against crypto players like Kraken and Coinbase.
In 2023, the SEC accused Kraken and Coinbase of supporting the trading of ETH and other digital assets, which the commission considered unregistered securities. Now, D’Angelo says that the SEC could be forced to dismiss its lawsuits against the two crypto exchanges, arguing that the federal agency’s arguments no longer hold water after approving Ethereum ETFs.
If the US judges agree with D’Angelo’s assessment and eventually throw out the SEC’s charges against Coinbase and Kraken, their verdict would put more pressure on Gensler, who has been criticized several times over his “regulation by enforcement actions” approach. Critics have argued that the SEC’s approach has stifled the growth of the crypto space in the US and forced numerous blockchain companies to relocate to other countries that are crypto-friendly.
Coinbase Legal Officer Comments on SEC’s Recent Ethereum ETF Decision
Meanwhile, Coinbase’s Senior Legal Officer, Paul Grewal, says the SEC’s decision to approve spot Ethereum ETFs has limited the commission’s power to police the cryptocurrency sector and may encourage crypto players to push back against “unfair” enforcement actions, which could result in fewer settlements.
Grewal also agrees with D’Angelo that crypto lawyers will use the SEC’s recent decision on Ethereum ETFs to urge the courts to dismiss the commission’s lawsuits against crypto players, arguing that Gensler and his colleagues have overstepped their mandate.
Crypto Lawyers to Adopt New Strategies
Moreover, these lawyers are likely to adopt new strategies in regard to how they give advice to their clients in the crypto space following the approval of Ethereum ETF. According to D’Angelo, lawyers may advise their clients to emphasize the commodity nature of their crypto assets in order to prevent the Securities and Exchange Commission from going after them.
SureTradeGroup.com is not responsible for the content, accuracy, quality, advertising, products or any other content posted on the site. Some of the content on this site is paid content that is not written or posted by our writers or editors and the opinions expressed do not reflect the opinions of this website. Any disagreement you may have with brands or companies mentioned in articles will need to be taken care of directly with those specific brands and companies. The responsibility of anyone who may click links in our articles and ultimately sign up for that product or service is their own. Forex, Stocks, Cryptocurrencies, NFTs and Dogital Tokens are all a high-risk asset, investing in them can lead to losses. Readers should do their own research before taking any action.