Binance CLO Says SEC Has No Reason to Reject Ethereum ETF Over Security Concerns

Coinbase Chief Legal Officer (CLO) Paul Grewal has become the latest crypto stakeholder to comment on recent reports that the United States Securities and Exchange Commission (SEC) is seeking to classify Ethereum (ETH) as a security.
As the SEC tries to classify ETH as a security, what about an Ethereum ETF?
For starters, the crypto industry received a report from Fortune yesterday that the SEC is pursuing a legal campaign that could potentially classify ETH as a security.
According to Fortune, the SEC has requested that several U.S. crypto-related companies provide important documents and financial records about the Ethereum Foundation to assist in its ongoing investigation.
Although the SEC has yet to confirm or deny the report, crypto enthusiasts believe that the news could be a stumbling block that could affect the upcoming Ethereum spot ETF.
It is worth mentioning that several asset management companies, including BlackRock and Fidelity Investments, have applied to launch Ethereum funds in the United States.
Although the SEC has delayed its decision on some Ethereum ETF applications, some experts still believe that the regulator will approve at least one application in May.
However, reports that the SEC is seeking to classify ETH as a security could dampen the chances of an Ethereum spot ETF launching in May.
The SEC has no reason to reject spot ETFs
In response, Grewal said that the SEC had no reason to reject multiple spot-based ETH ETF applications.
The Coinbase CLO added that he hopes the commission will not fabricate any reasons to question ETH’s long-standing regulatory status as a non-security.
Factors showing ETH is not a security
Interestingly, Grewal points to a few facts that prove Ethereum is not a security.
According to Grewal, the SEC has long considered ETH to be a commodity, a position that has enabled millions of Americans to hold the coin since it debuted in 2015.
He recalled how senior SEC officials, including former directors Bill Hinman and Gary Gensler, declared that Ethereum was not a security.
Additionally, Grewal mentioned how SEC lawyers compared ETH to Bitcoin in the commission’s lawsuit against Ripple. It is worth mentioning that both the U.S. Commodity Futures Trading Commission (CFTC) and the SEC agree that Bitcoin is a commodity, not a security.
Coinbase’s CLO said that federal courts and the U.S. CFTC have also classified Ethereum as a commodity and that ETH contracts are traded on CFTC-regulated exchanges.
Ethereum does not meet the Howey test
Furthermore, Grewal said that Ethereum does not meet all elements of the Howey test, a long-standing U.S. securities test. He specifically noted that Ethereum does not involve contractual obligations related to corporate business, adding that the launch of the merge upgrade does not automatically turn ETH into a security.
The merge is a major Ethereum upgrade introduced in 2022 that enables the currency to transition from its initial Proof-of-Work (PoW) model to a Proof-of-Stake (PoS) model.
Based on these facts, Grewal asserted that Ethereum is not a security and that the SEC has no reason to reject multiple applications for spot-based ETH ETFs.
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