To be a security, or not to be a security: that is the question – but don’t expect the SEC to answer.
California courts threw out a lawsuit against the SEC by HODL Law, which tried to force the SEC to clarify whether or not $ETH is a security (and therefore currently unlisted and subject to SEC enforcement action).
What does the latest clarification attempt tell us about $ETH, current legislation, and the future of the SEC’s outlook on crypto?
Let’s find out.
HODL Law Sues but Courts Reject Attempt
Hodl Law, a cryptocurrency-focused law firm (catchy tagline: ‘Decentralized Justice’) has been pushing for legal clarity from the SEC on whether Ethereum is considered a security.
The firm fears an unclear stance could lead to enforcement actions against it and other Ethereum users.
Multiple courts dismissed Hodl Law’s lawsuits, stating that the firm wasn’t in danger of SEC enforcement for using Ethereum.
The courts also noted that the SEC has not definitively classified Ethereum as a security, which leaves the matter unresolved.
As a decision last year noted:
Put more simply, it’s not enough that the SEC could damage Hodl Law with a future decision; there needs to be actual action for Hodl Law to have a case.
Will the SEC Ever Clarify Crypto’s Case? Not Anytime Soon
If you feel like having your cake and eating it, too, you could work for the SEC. They’ve mastered the art of mixed crypto messages.
There’s ongoing enforcement against crypto fraud, subpoenas against crypto venture capitalists, and a continued push against leading crypto exchanges.
There’s also the ongoing defeat of the SEC by Ripple and the fact that in July, the SEC approved $ETH spot Exchange Traded Funds (ETFs). This broadened TradFi support and opened the crypto doors to the $120T global wealth management market.
The SEC’s legal actions suggest a continued aggressive stance towards cryptocurrencies, though they remain ambiguous about Ethereum.
Furthermore, its assertion (in other cases) that a significant number of Ethereum nodes are based in the U.S. could lead to further jurisdiction claims over the Ethereum network.
In the most recent decision, the 9th Circuit Court of Appeals dismissed Hodl Law’s case, noting in a dismissively blistering note that:
In other words, the SEC doesn’t need to do anything and the lack of clarity works in its favor. Or so have the courts decided.
$ETH Sails On Into An Uncertain Legal Future
In the meantime, Ethereum and crypto continue to grow, even as pressure mounts for the SEC to provide clarity. But that pressure will have to come from higher up in order to work.
The legal uncertainty hasn’t stopped $ETH’s growth in the meantime; $ETH continues its slow upgrade to Eth 2.0 and steadily increases its utility.
References
- SEC Subpoenas Three Crypto VCs (DeFiLlama)
- SEC Charges Crypto Firm Novatech With Fraud (MSN)
- Hodl Law, PLC vs. Securities and Exchanges Commission (Court Listener)
- Hold Law, PLLC vs USSEC (Justia US Law)
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