Alex Thorn, head of firmwide research at Galaxy Digital, recently expressed skepticism about the approval of spot Ethereum ETFs in May.
The Securities and Exchange Commission’s (SEC) failure to actively engage with ETF applicants and recent subpoenas issued to cryptocurrency firms regarding their dealings with the Ethereum Foundation have cast a shadow of doubt over the approval, according to the analyst.
Fortune reported this week that the SEC was “waging an energetic legal campaign” to classify ETH as a security, citing U.S. companies that have received subpoenas related to an investigation.
Thorn, a former Fidelity Investments employee, said that if the SEC sought information about crypto firms’ interactions with the Ethereum Foundation, it would consider the original Ethereum initial coin offering (ICO) in 2014 to be an unregistered security, rather than classifying current secondary trading of ETH as securities trading. He suggested that he might be considering whether he had an offer.
The analyst suggested that the SEC could distinguish between the ICO and existing secondary trading of ETH, but that any enforcement action against the Ethereum Foundation after almost a decade would be “highly unregulated.”
SEC Chairman Gary Gensler declined to comment on whether the agency considers ETH a security. The SEC is reportedly considering Ethereum’s 2022 “Merge” upgrade as increasing the likelihood of ETH becoming a security due to the network’s transition from proof-of-work to proof-of-stake.
However, the SEC has allowed the launch of several futures-based Ethereum ETFs in 2023, a year after Ethereum’s transition to PoS. Therefore, Thorn argued that if the SEC were to pursue securities violations allegations against ETH or the Ethereum Foundation, it would be “treading on difficult terrain in terms of law, regulatory precedent, and impact on an industry that is more than a decade old.”
*This is not investment advice.
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