- ETF specialist James Seyffart says Ethereum has achieved commodity status even if the SEC refuses to admit it.
- He says the financial regulator will not brand ETH a security, lest they fall out with the CFTC.
- In his opinion, the second largest crypto by market cap deserves the same treatment as Bitcoin, potentially getting an ETF approval in 2024.
Ethereum (ETH) price took its own path to release itself from its leash to Bitcoin (BTC) as institutional players pursue exchange-traded funds (ETFs) for both product lines. Just as in the BTC market, ETH community members have reacted to developments around spot Ether ETFs.
Ethereum is a commodity, but SEC will not admit it: James Seyffart
Ethereum (ETH) has achieved the status of a commodity even if the US Securities & Exchange Commission (SEC) will not admit it. These are the words of James Seyffart, an analyst with Bloomberg Intelligence, adding that the financial regulator has engaged in multiple actions for the past five years (since 2018) showing that it actually acknowledges Ether in that sense.
Even if SEC won’t explicitly claim ETH to be a commodity in the way that they do for Bitcoin. They have implicitly accepted its commodity status for years. Huge shoutout to @SGJohnsson who has been critical in forming some of my views on this topic. https://t.co/vLq2abeJNO
— James Seyffart (@JSeyff) November 16, 2023
According to Seyffart, the financial regulator and its Chair, Gary Gensler, will not clearly state out loud the commodity status of Ether in the same way they do for Bitcoin. Nevertheless, he articulates that the second largest cryptocurrency by market capitalization deserves to be a spot exchange-traded fund (ETF) product just as much as the king of crypto, BTC.
We expect the SEC to treat it [ETH] more like Bitcoin and approve spot Ethereum ETFs in 2024.
In his opinion, the SEC’s reluctance to deem Ethereum a security is because it would put the agency at odds with the Commodities Futures Trading Commission (CFTC), its sister regulator overseeing the derivatives market.
In 2021, the global marketplace for futures and options trading in various asset classes, commonly termed CME, informed the CFTC that it intended to list Ether futures, adding that it had the option to do so as a standard futures or securities futures product.
Crypto ETF FAQs
An Exchange-Traded Fund (ETF) is an investment vehicle or an index that tracks the price of an underlying asset. ETFs can not only track a single asset, but a group of assets and sectors. For example, a Bitcoin ETF tracks Bitcoin’s price. ETF is a tool used by investors to gain exposure to a certain asset.
Yes. The first Bitcoin futures ETF in the US was approved by the US Securities & Exchange Commission in October 2021. A total of seven Bitcoin futures ETFs have been approved, with more than 20 still waiting for the regulator’s permission. The SEC says that the cryptocurrency industry is new and subject to manipulation, which is why it has been delaying crypto-related futures ETFs for the last few years.
Bitcoin spot ETF has been approved outside the US, but the SEC is yet to approve one in the country. After BlackRock filed for a Bitcoin spot ETF on June 15, the interest surrounding crypto ETFs has been renewed. Grayscale – whose application for a Bitcoin spot ETF was initially rejected by the SEC – got a victory in court, forcing the US regulator to review its proposal again. The SEC’s loss in this lawsuit has fueled hopes that a Bitcoin spot ETF might be approved by the end of the year.
Potential impact of the SEC publicly acknowledging Ethereum as a commodity
Just as the Ripple (XRP) victory has boded well for altcoins that had been previously labeled securities – including Solana, Cardano, and Polygon – and as the Grayscale victory augured well for the spot ETF race, labeling Ethereum a security would have a similar effect for the altcoin community. Specifically, it would give altcoins better grounds to push for the same label.
If they classify ETH as a commodity other cryptos will have a strong case for being classified as a commodity as well
— Lately Loop (@LatelyLoop) November 16, 2023
Nevertheless, it would increase investor confidence, inspiring an influx of capital into the ETH market, potentially driving up Ethereum price.
According to one Crypto X community member, the status of Ethereum “could be an issue that comes up at day 90 for the spot ETH 19b-4 filings.” The SEC will then have to state the reasons for which it is contemplating disapproval (if it actually gets to this point) in the order instituting proceedings to determine whether to approve or disapprove a spot ETH ETF.
Nevertheless, Seyffart says that “If Ether is a security, then the CME futures likely need to be delisted and so do the Ether futures ETFs.” Such an outcome would spur turbulence in the regulatory corridors, putting the SEC against the CFTC and reducing the odds of a spot Ether ETF approval.
In Seyffart’s option, this is because the CFTC has considered Ethereum a commodity for years, subject to its regulatory jurisdiction. In the same way, Ether futures have been listed for years on CFTC-regulated exchanges, while cleared Ether swaps have been listed for trading on CFTC-regulated swap execution facilities that are not registered with the SEC without being considered “mixed swaps” subject to joint CFTC and SEC jurisdiction.
In retrospect, if the SEC were willing to go down a route where they are at odds with the CFTC, then they would not have allowed Ethereum futures ETFs to list on SEC-regulated exchanges.