Coinbase legal chief argues SEC has ‘no good reason’ to deny spot Ethereum ETFs
Amid ongoing speculation surrounding the prospect of spot Ethereum exchange-traded fund approvals in the United States, Coinbase Chief Legal Officer Paul Grewal said the Securities and Exchange Commission has “no good reason” to deny the ETF applications.
“Sigh… again with the ETH misinformation as we await a decision on ETH ETPs,” Grewal wrote on X. “Millions of Americans hold ETH; it has been vital to crypto since its 2015 launch; and ETH is a commodity, not a security.”
Grewal went on to argue that the SEC has taken this position on its status for years, with senior SEC officials like former Director of Corporation Finance Bill Hinman’s speech in 2018 suggesting ether was not a security. In the same year, before becoming SEC Chair, Gary Gensler also testified to Congress that ether is not a security, Grewal added.
Recent comparisons between ether and bitcoin by the SEC’s own trial lawyers in the case against Ripple Labs, the Commodity Futures Trading Commission and federal courts’ confirmation of ether as a commodity and the ether futures contracts which started trading on CFTC-regulated futures exchanges in 2021, were additional arguments against the classification of ether as a security, Grewal said.
“The SEC has no good reason to deny the ETH ETP applications. And we hope they won’t try to invent one by questioning the long established regulatory status of ETH, which the SEC has repeatedly endorsed. That’s not how the law works. And Americans deserve better,” Grewal said.
Furthermore, the Coinbase CLO added that the SEC’s Howey Test doesn’t determine ether’s status either. “Digital assets like ether that do not involve an ongoing contractual obligation related to a business enterprise are not ‘investment contracts’ or otherwise ‘securities.’” Even if the test was applied, ether fails it anyway, he argued.
Ethereum Foundation in the spotlight
Yesterday, The Block reported that the Ethereum Foundation — a non-profit based in Switzerland that helps support the Ethereum ecosystem — had removed a “Warrant Canary” from its website following a voluntary and confidential enquiry from an unspecified state authority, according to the Foundation’s GitHub repository.
“This commit removes a section of the footer as we have received a voluntary enquiry from a state authority that included a requirement for confidentiality,” said Pablo Pettinari, a front-end developer at the Ethereum Foundation, in a commit on Feb. 26.
The removed “Warrant Canary” image represented that the Ethereum Foundation had not been contacted by an agency in a way that required contact not to be disclosed. It also removed text that said, “The Ethereum Foundation (Stiftung Ethereum) has never been contacted by any agency anywhere in the world in a way which requires that contact not to be disclosed.”
Historical records from the Wayback Machine indicate that the canary and its message were still visible on the Foundation’s website as recently as January.
Meanwhile, Fortune reported that the SEC seems to be “waging an energetic legal campaign to classify Ethereum as a security” — citing crypto companies that have received subpoenas connected to an Ethereum-related investigation.
Individuals from companies receiving the subpoenas said the inquiries were highly-specific to the Ethereum Foundation. In addition, some firms received subpoenas recently, while others obtained theirs after Ethereum switched to a proof-of-stake (PoS) consensus system in September 2022 in a transition dubbed “The Merge.”
