Future of Ethereum ETF hangs in balance after SEC announcement

The U.S. Securities and Exchange Commission (SEC) has issued an important notice regarding the approval of an Ethereum Exchange-Traded Fund (ETF). The notice, brought to light by financial attorney Scott Johnson, highlights the scrutiny the proposed ETF faces. Additionally, it highlights potential hurdles on the road to approval.

The SEC will debate ETH classification before deciding on Ethereum ETF in the spot market Johnson, a leading figure in the crypto world, took to the social media platform X to reveal the contents of the official communication. He stated: “I am aware that this is widely considered a possibility, but this is your official notice that the SEC is considering the security question for ETH in this upcoming spot ETF order.”

The crux of the matter revolves around whether the proposed Ethereum ETF complies with regulatory standards. In particular, this takes into account the investment product’s classification under Nasdaq Rule 5711(d) as Commodity-Based Trust Shares. In addition, Johnson emphasized the SEC’s obligation under 15 USC 78s(b)(2)(B) to provide notice of the grounds for consideration for disapproval, citing concerns about the Trust’s underlying assets and their classification.

The official notice, as quoted by Johnson, reads: “Pursuant to Section 19(b)(2)(B) of the Act, the Commission is providing notice of the grounds for disapproval to be considered. The Commission shall establish procedures to allow additional analysis of the consistency of the proposed rule change with Section 6(b)(5) of the Act.”

Specifically, the SEC is examining whether the Ethereum Trusts have properly submitted their proposal to list and trade the shares, taking into account the nature of the underlying assets and their compliance with regulatory standards. Johnson’s revelation sheds light on the potential stumbling blocks for the Ethereum ETF’s approval process.

In an ” Moreover, he highlighted the SEC’s conflicting position on the approval of the Spot Bitcoin ETF and the decision on the Ethereum ETF.

Johnson emphasized that the SEC has never questioned the classification of the Bitcoin Spot/Futures ETFs, while it is the exact opposite with ETH ETFs. However, the Commodity Futures Trading Commission (CFTC) and Consensys’ actions against the SEC are also helping to raise these questions.

The CFTC has always considered ETH a commodity, while the SEC considered declaring it a security at Prometheum’s request. Meanwhile, Ethereum developer Consensys filed a lawsuit against the SEC last month. The company urged the regulator not to label ETH as a security.