This is how the SEC could classify ETH as a security

Alex Thorn, the head of research at Galaxy Research, speculated that the SEC might differentiate between Ethereum (ETH) and staked Ether, possibly classifying the latter as a security.

He noted that this distinction could provide a regulatory loophole for approving spot Ethereum ETFs.

Spot the Ethereum ETF Approval Gap

In a May 21 post on X, he stated: “If the speculation about an SEC 180 on Ethereum ETFs is true, I guess they’re trying to thread a needle between ‘ETH’ NOT a security and ‘ETH staked ‘ (or even weaker, ‘bet as ETH service’) as BEING a security”.

if the speculation about an SEC 180 on ethereum ETFs is true, I guess they’re trying to thread a needle between “ETH” which is NOT a security and “staked ETH” (or even weaker, “stake as service ETH ” ) as BEING a security.

that would be somewhat congruent with…

— Alex Thorn (@intangiblecoins) May 21, 2024

This potential distinction could have implications for spot Ethereum ETFs, which the SEC has so far been reluctant to approve. According to Thorn, this change would align with the SEC’s ongoing legal battles and investigations, allowing it to approve spot Ethereum ETFs while maintaining consistency with its previous arguments and positions.

However, Thorn also highlights that this approach could involve specific restrictions on Ethereum ETFs at the time. He suggested that the SEC could ban ETFs from staking the ETH they hold.

By distinguishing between ETH and staked ETH, the SEC could allow the introduction of spot Ethereum ETFs while maintaining a strict regulatory framework around staked assets and other altcoins.

SEC approval optimism

Bloomberg Intelligence ETF analysts Eric Balchunas and James Seyffart raised their forecast probability of spot approval for the Ether ETF from 25% to 75% on Monday. That change followed discussions suggesting the SEC might take a more favorable stance toward such applications.

Update: @JSeyff and I’m upping our Ether ETF spot approval odds to 75% (up from 25%), hearing chatter this afternoon that the SEC may be doing a 180 on this (increasingly political aspect) , so now everyone struggles (as everyone else assumes we do). they would be denied). See… https://t.co/gcxgYHz3om

— Eric Balchunas (@EricBalchunas) May 20, 2024

In a May 20 post on X, Balchunas hinted that the SEC’s increased pace toward ETF approval could be influenced by political pressure, in contrast to the previous lack of commitment from the agency with ETF applicants.

Analysts later clarified that their increased odds only apply to 19b-4 approvals, with the SEC’s decision on the VanEck spot Ether ETF expected on May 23. “We also need S-1 approvals. It could be weeks or months before we see S-1 approvals and therefore a live Eth ETF,” explained Seyffart.

He added: “That said, if we’re correct and we see these theoretical approvals later this week, it *should* mean that S-1 approvals are a matter of ‘when’ not ‘if’.”

Meanwhile, Ethereum is up more than 20% on news that the SEC may approve spot ETH ETFs, despite earlier market consensus that approval was unlikely.

SPECIAL OFFER (Sponsored) Binance Free $600 (Exclusive to CryptoPotato): Use this link to register a new account and receive an exclusive welcome offer of $600 to Binance (full details).

2024 LIMITED OFFER on BYDFi Exchange – Up to $2888 Welcome Reward, Use this link to register and open a 100 USDT-M position for free!