Is Ethereum a Security? SEC Chair Gary Gensler Defers on the Question

By Decrypt March 07, 2024 In Bitcoin, Ethereum
SEC Chair Gary Gensler in 2013. Image: Third Way Think Tank (CC BY-NC-ND 2.0)
SEC Chair Gary Gensler in 2013. Image: Third Way Think Tank (CC BY-NC-ND 2.0)

The chair of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, refused to be drawn on whether the regulator considers Ethereum to be a security—even as the SEC considers multiple applications for spot Ethereum ETFs.

Speaking on Bloomberg TV, Gensler said he would “defer on that question,” when pressed on whether the regulator viewed Ethereum as a security.

“On any one of these crypto tokens, it’s about the facts and circumstances as to whether the investing public is anticipating a profit based on the efforts of others,” he said. “We do have filings in front of us. I’m not going to comment.”

The SEC’s position on Ethereum has become a pressing one, as it deals with multiple applications for a U.S. spot Ethereum ETF. Just this week, the regulator again delayed its decision on whether to approve the iShares Ethereum Trust from investment giant BlackRock, after having delayed spot Ethereum ETF applications from Fidelity, Invesco, and Galaxy Digital.

Bloomberg ETF analyst James Seyffart predicted that the SEC would continue delaying a decision on Ethereum ETF applications until May 23, the final deadline for applications from VanEck and Cathie Wood’s investment firm Ark Invest.

If that’s the case, it follows the regulator’s pattern of slow-walking the approval of spot Bitcoin ETFs.

In January, the regulator approved multiple spot Bitcoin ETFs—but it did so only reluctantly, with Gensler stating that “circumstances, however, have changed,” after a court ordered the SEC to review Grayscale’s application to convert its GBTC product into an ETF.

At the time, Gensler stressed that the approval of spot Bitcoin ETFs, “should in no way signal the Commission’s willingness to approve listing standards for crypto asset securities.” He also added that, “investors should remain cautious about the myriad risks associated with Bitcoin and products whose value is tied to crypto.”

He reiterated this view in Wednesday’s interview, calling crypto a “highly speculative asset class.”

“Are there cash flows, or what’s the use case for thousands of these tokens?” Gensler asked. He added that, “They also may be securities, because the investing public is relying on the efforts of some group of entrepreneurs in the middle of these products.”

Gensler, the SEC and Ethereum

Under Gensler, the SEC has long held the view that Bitcoin is a commodity rather than a security, while refusing to comment on the status of Ethereum.

Gensler’s refusal to commit to the SEC’s position on Ethereum’s status as a security or commodity stands in marked contrast to his statements prior to joining the regulator.

In 2018, while still a lecturer at MIT, Gensler said that Ethereum is “not a security” in the eyes of the SEC. He added that, “In 2018, the Securities and Exchange Commission has said regardless of what it might have been” at the time of its 2014 ICO, “it’s now sufficiently decentralized that we’ll consider it not a security.”

At the time, Gensler appeared to be referring to an opinion expressed by the SEC’s former Director of Corporate Finance, William Hinman, in his much-cited “sufficiently decentralized” speech from June of that year.

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