Recent Filing Shows SEC Regards ETH as Security. ETF Denial Imminent? 

Recent Filing Shows SEC Regards ETH as Security. ETF Denial Imminent? 

As the days draw near for the U.S Securities and Exchange Commission (SEC) to decide on the Ethereum ETF applications before it, new revelations have emerged that further reduce the hopes of an approval.

According to a recently released filing by the SEC, the agency considers Ethereum to be a security rather than a commodity as is the case of Bitcoin. Van Buren Capital General Partner Scott Johnsson highlighted this part of the filing on Tuesday last week.

“I’m aware this is widely considered a possibility, but this is your official notice that the SEC is considering the security question for this upcoming spot ETF order,” Johnsson said. “Note that this question was never (afaict) asked regarding a spot/futures BTC ETF product,” he added.

“The obvious purpose is to potentially deny on the basis that these spot filings are improperly filed as commodity-based trust shares and do not qualify if they are holding a security,” Johnsson added.

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The SEC through its Chairman Garry Gensler has repeatedly said that Ethereum is a security. The March filing related to applications for EThereum ETFs asked a question thus: “Given the nature of the underlying assets held by the Trust, has the Exchange properly filed its proposal to list and trade the Shares under Nasdaq Rule 5711(d), Commodity-Based Trust Shares?”

The Nasdaq rule in question defines the term “Commodity-Based Trust Shares” as a security, which puts Ethereum in that category.

High Odds of ETF Denials

Based on the sentiments of the SEC around Ethereum, there is almost no chance of an Ethereum ETF approval. According to Bloomberg ETF analyst Eric Balchunas, 

“TLDR: the SEC asked commenters regarding the ether spot ETFs whether these filers have properly filed their ETF listing proposals as commodities. This shows the SEC is perhaps considering ETH is a security in their denial. Our odds of approval remain the same: slim to none.”

Similarly, another Bloomberg ETF analyst James Seyffart said: “Looks like odds just went up for SEC to deny Ethereum ETFs by claiming ether is a security. Not a guarantee that they will do this but I think this almost guarantees that the SEC is at least considering it. First I’ve seen in public SEC documents.

Why Ethereum Futures ETFs

In a different perspective, President of The ETF Store Nate Geraci said that if the SEC considered Ethereum to be a security, why did they approve Ethereum futures ETFs earlier? This sounds like a reasonable question but some have argued it was because the ETFs could hold commodity or ETF futures.

The crypto community awaits the SEC’s decision concerning the applications in the coming week, which will determine what happens next.

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Archie Lovell
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Archie Lovell

Archie Lovell, a premier voice in crypto journalism, skillfully demystifies the intricate world of digital currencies. With a keen analytical eye and compelling narratives, Archie's writings delve deep, offering clarity amidst the complexities of blockchain. His expertise and style make him a trusted guide in the crypto space.

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