ETH ETFs Begin Trading on Markets

As previously argued, (see reprinted comment below,) this is not a case of the SEC doing the right thing for the wrong reason: it is the SEC doing the right thing for no reason. That the SEC would reverse its position on whether Ethereum might be a security without either any explanation of its reasoning or any explanation of its determination that Ethereum is not a security (while maintaining that other crypto assets are securities) is a dereliction of its obligations.

Comment from May 23, 2024–(the date the SEC gave initial approval to the listing by the exchanges of the Ethereum ETFs.)

This Order [approving the list of Ethereum ETFs] is arguably the most legally significant development during the Chair Gensler era with respect to digital assets. It is a concession that ether is not a security. And yet, to read the SEC's release approving the exchanges' listing applications, one might reasonably conclude that the SEC never had suggested, even remotely, that ether might be a security. Apparently, the topic did not deserve a sentence, not even a footnote.

"Like must be treated as like" is one of Chair Gensler's favorite aphorisms, which he generally uses to argue that all digital assets must be securities. But if "like must be treated as like," and if ether is not a security, it likewise follows that there are other digital assets that are not securities–surely ether is not unique, is not like nothing else.  

While the SEC was able to avoid explaining how it concluded that ether is not a security in the Order, it will undoubtedly be forced to justify itself in the various litigations that it has brought asserting that other cryptocurrencies are securities. How is it that those cryptocurrencies are not like ether? In the absence of any rationale, the SEC will have put its litigation agenda in something of a shambles.  

The Order makes it a great day for digital asset enthusiasts, and the conclusion is generally regarded as the right answer on the law as to the characterization of ether. However, the absence of any explanation by the SEC, the very material omission of any explanation of how the SEC reached that result, makes it a bad day for the SEC in its role as arbiter of transparency and disclosure. 

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