SEC Implicitly Recognizes Ether as Commodity, Paving Way for ETF
Last updated: January 5, 2024 01:19 EST
. 2 min read
An Ethereum (ETH) spot ETF is due to reach the U.S. market after a slew of Bitcoin (BTC) based equivalents are likely greenlighted next week, according to Bloomberg ETF analyst James Seyffart.
During a private webinar with CryptoQuant on Thursday, the analyst argued that the Securities and Exchange Commission (SEC) has quietly recognized ETH as a commodity rather than a security, placing it in the same regulatory category as BTC.
“The SEC has approved Ethereum futures ETFs,” noted Seyffart, referring to the mass approval of funds from VanEck, ProShares, Bitwise, and Valkyrie in August.
Sponsors were inspired to apply at the time after witnessing the SEC approve the first leveraged Bitcoin futures ETF in June. This signalled to the market that regulators might now be willing to list crypto products with a higher risk profile, like Ethereum futures.
“So again, Gary Gensler will not explicitly say whether Ethereum is a security or a commodity, but in their action, by approving those Ethereum futures ETFs, they’re implicitly accepting those Ethereum futures as commodities futures,” explained Seyffart.
The distinction is important: commodities and securities face different regulatory, tax, and reporting requirements, with greater burdens arguable attached to the latter.
The Commodities and Futures Trading Commission (CFTC) – the SEC’s sibling market regulator – has long considered both BTC and ETH to be commodities.
By contrast, SEC chairman Gary Gensler has long kept a tight lip regarding ETH’s classification, dodging interviewers when probed on the matter.
That said, the agency excluded mentioning ETH in its lawsuits against Binance and Coinbase last year, which named dozens of other top cryptos including Solana (SOL), Cardano (ADA), and Polygon (MATIC) as securities.
Likelihood Of ETF Approval
The SEC has also offered few explicit details about whether it will approve or deny Bitcoin spot ETF applications its received from BlackRock, Fidelity, Grayscale, and others, only noting that it’s making a “fresh evaluation” of such proposals after losing its court case with Grayscale in August.
Given rising engagement and discussion with applicants in recent months, analysts like Seyffart assign a 90% likelihood to ETFs being approved early next week. Ethereum ETFs aren’t quite so guaranteed yet, but the SEC will have a hard time denying them. He added:
“It wouldn’t just be the SEC going against the crypto industry. If they call Ethereum a security, it’ll be going against their sister regulator, CFTC.”