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If SEC classifies ETH as a security, it challenges CFTC's commodity perspective, says analyst

The potential classification could create a contradiction with the SEC's prior regulatory approval of Ethereum Futures ETFs.

SEC Ethereum securities debate

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A recent Fortune report raised eyebrows by suggesting the US Securities and Exchange Commission (SEC) is legally pushing to classify Ethereum as a security. Despite no official confirmation from the SEC, the news is big enough to ignite controversy among financial experts and crypto members. According to Fox News journalist Eleanor Terrett, such a classification would directly challenge the Commodity Futures Trading Commission’s (CFTC) stance on Ethereum as a commodity.

Terrett said in a separate post that if the Fortune report is correct, it explains the SEC’s current inaction on spot Ethereum exchange-traded fund (ETF) applications. She speculated that the SEC might be waiting for the ongoing investigations to conclude before making a decision on these filings.

“If this is true, then it explains why the [SEC] has been so mum with the ETH spot ETF issuers. The [SEC] staff may be waiting for any lingering investigations to wrap before Gary Gensler gives them direction,” stated Terrett.

This potential move is noteworthy considering the SEC’s 2018 declaration under William Hinman, which positioned ETH “outside of the agency’s regulatory purview.” Terrett also noted the possibility of the SEC scrutinizing Ethereum’s Initial Coin Offering (ICO) during its investigation. This aligns with how New York Attorney General Letitia James argued ETH as a security based on its ICO in her lawsuit against the crypto exchange KuCoin.

Beyond speculation

Classifying ETH as a security would be an aggressive move by the SEC, potentially contradicting its approval of Ethereum Futures ETFs. Moreover, the SEC’s ongoing struggle to define Ripple’s XRP as a security could bode well for the Ethereum team.

Shedding light on the matter, Cinneamhain Ventures partner Adam Cochran argued that there’s a chance the Ethereum Foundation’s way of selling ETH back in the day could be considered illegal under current regulations. However, he added that even if a violation occurred, it’s likely too late to pursue legal action because the statute of limitations has passed.

Cochran also highlighted that the existence of approved Ethereum Futures ETFs suggests regulators already consider ETH a commodity. This creates a potential conflict between government agencies, especially during an election year.

Furthermore, the involvement of major players like BlackRock and Wall Street firms in Ethereum-linked development could throw another wrench into the SEC’s potential regulatory efforts.

Fortune Crypto is currently the only source reporting on a potential SEC investigation. There is a lack of confirmation from other sources and details about the investigation.

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