The Chair of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, refrained from providing a clear stance on whether the regulator considers Ethereum to be a security, despite the ongoing evaluation of numerous applications for spot Ethereum ETFs. During an interview on Bloomberg TV, Gensler opted to “defer on that question” when asked directly about Ethereum’s classification as a security.
He emphasized the importance of evaluating the facts and circumstances surrounding each crypto token to determine whether the investing public anticipates profit based on the efforts of others. Gensler acknowledged the existence of filings before the SEC but declined to offer specific comments.
The SEC’s position on Ethereum is particularly significant as it handles multiple applications for a U.S. spot Ethereum ETF. Recently, the regulator postponed its decision on BlackRock’s iShares Ethereum Trust, following earlier delays with applications from Fidelity, Invesco, and Galaxy Digital.
Bloomberg ETF analyst James Seyffart predicted ongoing delays in the SEC’s decisions on Ethereum ETF applications until May 23, the final deadline for VanEck and Ark Invest’s applications. This aligns with the regulator’s approach to cautiously considering spot Bitcoin ETF approvals, as demonstrated earlier when approving such ETFs reluctantly.
Gensler highlighted the evolving circumstances that led to approving spot Bitcoin ETFs in January, emphasizing the changing landscape after a court ordered a review of Grayscale’s application to convert its GBTC product into an ETF. He urged caution among investors due to the numerous risks associated with Bitcoin and crypto-related products.
In the interview, Gensler reiterated his cautious stance on crypto as a “highly speculative asset class” and questioned the underlying cash flows and use cases for the multitude of tokens. He pointed out the potential classification of certain tokens as securities, cautioning that the investing public might rely on the efforts of specific entrepreneurs associated with these products.
Gensler’s Approach to Ethereum within the SEC’s Regulatory Framework
Under Gensler’s leadership, the SEC has consistently categorized Bitcoin as a commodity rather than a security, while refraining from providing a definitive stance on the status of Ethereum.
Gensler’s current reluctance to affirm the SEC’s position regarding Ethereum’s classification as a security or commodity marks a notable departure from his previous statements before assuming his role at the regulatory agency.
In 2018, during his tenure as a lecturer at MIT, Gensler explicitly stated that Ethereum is “not a security” according to the SEC. He emphasized that the SEC had acknowledged Ethereum’s decentralization sufficiently, stating, “In 2018, the Securities and Exchange Commission has said regardless of what it might have been” during its 2014 ICO, “it’s now sufficiently decentralized that we’ll consider it not a security.”
At that time, Gensler’s remarks seemed to reference a viewpoint articulated by the SEC’s former Director of Corporate Finance, William Hinman, in his widely referenced “sufficiently decentralized” speech delivered in June of the same year.