Alex Thorn of Galaxy Digital has put forth an intriguing suggestion regarding the classification of staked Ethereum by the SEC in order to potentially pave the way for the approval of spot Ethereum ETFs.
In a recent post on May 21, Thorn proposed that the U.S. Securities and Exchange Commission (SEC) could differentiate between Ethereum and staked Ethereum, possibly deeming the latter as a security.
This distinction could have significant implications for spot Ethereum ETFs, which have faced resistance from the SEC in the past.
Thorn believes that this shift in strategy would allow the SEC to approve Ethereum ETFs while still upholding their legal battles and investigations. However, he also mentions that this approach might come with certain restrictions on spot Ethereum ETFs.
By drawing a line between ETH and staked ETH, the SEC could navigate the regulatory landscape more smoothly, potentially opening the door for Ethereum ETFs while maintaining a strict regulatory framework around staked assets and other cryptocurrencies. Nevertheless, it remains uncertain how the SEC would treat tokenized versions of Ethereum or Bitcoin used in layer-2 solutions, such as lending.
Following the news of a possible approval of spot ETH ETFs by the SEC, Ethereum saw a surge of over 17%, surprising many who believed the watchdog would not give the green light.
Bloomberg senior analyst Eric Balchunas, who previously had low expectations for spot Ethereum ETF approval, shifted his stance on May 20. In a recent post, he raised the likelihood of approval from 25% to 75%, suggesting that the SEC’s accelerated pace in approving the ETFs could be due to political pressure, as their previous lack of engagement with ETF applicants was evident.