Paul Grewal, Chief Legal Officer of Coinbase, stated that there is no valid reason for the SEC to reject the requests for spot ETFs on Ethereum.
It also emphasized ether’s historical classification as a commodity and referred to the SEC’s previous statements in support of this position. Let’s see all the details below.
Summary
Paul Grewal, Coinbase’s chief legal officer, defends SEC’s spot ETF requests on Ethereum
As anticipated, among the constant speculations surrounding the prospect of Ethereum spot and the approvals of exchange-traded funds in the United States, Coinbase’s Chief Legal Officer, Paul Grewal, reiterated that the Securities and Exchange Commission (SEC) has “no good reason” to reject ETF requests.
Grewal has commented on X as follows:
“It is frustrating to see misinformation once again regarding ETH while awaiting a decision on ETH ETPs. Millions of Americans hold ETH; it has been crucial for cryptocurrencies since its launch in 2015; and ETH is classified as a commodity, not as a security.”
Grewal continued to argue that the SEC has maintained this position on the status of ether for years.
In particular, referring to speeches by senior SEC officials such as former director of corporate finance Bill Hinman in 2018, who suggested that ether was not a security.
He added that before becoming president of the SEC, Gary Gensler also testified to Congress that ether is not a security.
Opinions supporting Grewal’s ideas
Grewal has also indicated other factors that are further arguments against classifying ether as a security. Among these we see the recent comparisons between Ether and Bitcoin in the context of the case against Ripple Labs, the Commodity Futures Trading Commission, and the federal courts’ confirmation of ether as a commodity.
Still, even Ether futures contracts that began trading on futures exchanges regulated by the CFTC in 2021:
“The SEC has no good reason to reject ETP requests on ETH. We hope they don’t try to come up with one by questioning ETH’s long-standing regulatory status, which the SEC has approved multiple times. That’s not how the law works, and Americans deserve better.”
Furthermore, Coinbase’s Chief Legal Officer added that even the Howey test by the SEC does not determine the status of ether.
“Digital assets like ether, which do not imply a continuous contractual obligation related to a commercial activity, are not ‘investment contracts’ or ‘securities’.”
Even applying the test, the ether does not pass such evaluation, he stated.
Ethereum Foundation removes the “Warrant Canary”
Recently, the Ethereum Foundation, a non-profit organization based in Switzerland that supports the Ethereum ecosystem, removed a “Warrant Canary” from its website.
This in response to a voluntary and confidential request from an unspecified state authority, according to the GitHub repository of the Foundation.
Pablo Pettinari, front-end developer at the Ethereum Foundation, stated in a commit on February 26th:
“This commit removes a section of the footer because we received a voluntary request from a state authority that included a confidentiality requirement.”
The image of the “Warrant Canary” removed indicated that the Ethereum Foundation had not been contacted by an agency in a way that required non-disclosure of the contact.
The historical documents of the Wayback Machine indicate that the “Warrant Canary” and its message were still visible on the Foundation’s website until January.
Meanwhile, Fortune reported that the SEC seems to be “conducting an aggressive legal campaign to classify Ethereum as a security”, citing cryptocurrency companies that have received subpoenas related to an investigation into Ethereum.
The people involved in the companies that have received the summonses stated that the investigations were highly specific to the Ethereum Foundation.
Some companies have received the summonses recently, while others have obtained them after Ethereum switched to a proof-of-stake (PoS) consensus system in September 2022 in a transition dubbed “The Merge”.
Contrary to Grewal’s point of view on the SEC’s position throughout Ethereum’s history, others see the transition to PoS as a key differentiating factor.
With the investigation raising doubts about whether it is part of a broader push to classify ether as a security, potentially thwarting hopes that the regulatory authority will approve Ethereum spot ETFs in the coming months.
