The Chief Legal Officer of Coinbase, Paul Grewal, has publicly argued that the U.S. Securities and Exchange Commission (SEC) lacks valid grounds for denying the establishment of Ethereum-based Exchange-Traded Funds (ETFs). Despite ongoing debates over the classification of Ethereum, Grewal has emphasized its status as a commodity recognized by Ripple Labs, the Commodity Futures Trading Commission (CFTC), and federal courts, countering the idea that it should be considered a security.
SEC’s Position on Ethereum Under Scrutiny
Grewal has highlighted the importance of Ethereum to the cryptocurrency market since its inception in 2015 and its widespread ownership among American investors. He urges the SEC not to contrive unfounded reasons to obstruct Ethereum ETF applications, pointing out that the law should not be manipulated to question Ethereum’s established regulatory status.
Ethereum Foundation’s Transparency in Question
Recent events have brought the Ethereum Foundation into the spotlight as it removed a Warrant Canary from its website amid a confidential government investigation. This raised questions about the foundation’s previous claims of no contact with any institution under non-disclosure requirements. Furthermore, crypto firms have received subpoenas from the SEC, specifically targeting the Ethereum Foundation, particularly following Ethereum’s switch to a Proof-of-Stake system through The Merge update.
SEC Chairman Gary Gensler has previously suggested that Proof-of-Stake assets might be considered securities, given that profits depend on the efforts of others. Meanwhile, experts in the crypto field, such as lawyer Preston Byrne, speculate on the strategies the SEC might employ to challenge Ethereum’s similarity to Bitcoin concerning initial asset distribution.
Despite the uncertainty, Bloomberg analysts have recently dialed back their optimism for the approval of spot Ethereum ETFs, with a 25% chance by May 23rd, the decision deadline for an application by Ark and 21Shares. The SEC has delayed decisions on multiple applications while companies like Fidelity and Grayscale have updated theirs to reflect staking activities, an aspect under close scrutiny by the agency.
