Alex Thorn, Head of Research at Galaxy Research, has raised concerns about the Securities and Exchange Commission (SEC) potentially categorizing staked Ether as a security.
Thorn’s speculation comes amidst growing expectations that the U.S. SEC might soon approve Ethereum exchange-traded funds (ETFs).
“If the speculation about a 180-degree turn from the SEC on Ethereum ETFs is true, I would speculate that they might try to distinguish between ‘ETH’ not being a security and ‘staked ETH’ (or even more tenuously, ‘staking as a service ETH’) being classified as a security,”
Thorn wrote in a recent social media post.
Thorn suggested that the strategic shift to approve an Ethereum ETF could be “somewhat aligned” with previous court cases and reports regarding the SEC’s various investigations. This move could potentially allow the SEC to approve Ethereum ETFs while maintaining their previously stated opinions or arguments.
In response to Thorn’s post, a community member raised a further concern, questioning whether including staked Ether (ETH) within an ETF would create liquidity challenges, potentially hindering compliance with regulatory requirements.
Thorn responded to the community’s liquidity concern by noting that lending ETF collateral typically has limits, which could serve as a comparable reference point. He also mentioned that European exchange-traded products (ETPs) offer staking services.
Historically, the U.S. SEC has attempted to classify Ether as a security, a trend that persists, as highlighted in a recent report by Fox Business producer Eleanor Terret.
Terret, referencing court documents filed by ConsenSys on April 29, indicated that the SEC and its Chair, Gary Gensler, have considered Ether an unregistered security “for at least a year.”
Bloomberg senior analyst Eric Balchunas stated on May 20 that despite the ongoing shifts between approval and rejection, the odds of approval for an Ethereum ETF have risen from 25% to 75%.
This significant change in outlook followed Balchunas hearing “chatter […] that [the] SEC could be doing a 180” on the matter, as it becomes “increasingly political.”
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