Coinbase Chief Legal Officer: SEC designates S-1 as Ethereum spot ETF registration option, indicating that it believes ETH is not a security

The U.S. SEC approved Form 19b-4 for multiple Ethereum spot ETFs this week, including those from BlackRock, Fidelity, and Grayscale. While the forms have been approved, ETF issuers need to make the S-1 registration statement effective before they can start trading. Legal experts have different views on whether the U.S. SEC's approval of Ethereum ETFs means everything has changed. Coinbase Chief Legal Officer Paul Grewal said in an interview: "I do think this is a watershed in the long-standing debate about the status of ETH. For a long time, the SEC has been evasive about its position and failed to indicate whether Ethereum is a security, a non-security, a commodity, or something else." Grewal claimed that because the issuer used the S-1 form, a certain percentage of the assets in the fund can be securities: "By specifying S-1 as a registration option, the SEC means that, by definition, these funds do not include assets that account for more than 40% of the portfolio as securities." He added: "There is no conclusion that can be drawn other than that ETH is not a security." The SEC did not immediately respond to a request for comment. Others, including Coy Garrison, former legal counsel to SEC Commissioner Hester Peirce, have also said that ETH must become a commodity after the spot Ethereum ETF is approved. Garrison said in an email that the SEC's approval order confirms that ETH is a commodity. In its order approving the Ethereum products, the funds are referred to as "commodity-based trust shares," which states that "if ETH is a security, approval is inappropriate under these specific exchange rules." However, Grewal and others added that the SEC could still say ETH is a security. "Even with an approval order, the SEC could argue that any particular facts and circumstances surrounding the offer and sale of ETH in a particular transaction constituted a securities offering," Garrison said. 0x Labs general counsel Ashley Ebersole said the SEC's approval order does not mean the agency has decided how to classify ETH and could still claim ETH is a security in the future. “I think they (SEC) will say that just because we accept this description of ETH during the ETF process doesn’t mean we can later determine whether it is a commodity or a security,” Ebersole said. (The Block)