Is SEC Halting the Ethereum ETF?

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Is SEC Halting the Ethereum ETF?

Diving into the correlation between Ethereum ETF filing and its Foundation probe. March 20 reports cite that the Ethereum Foundation – the Swiss non-profit organization at the heart of the Ethereum ecosystem – is facing inquiries from an unnamed “state authority”, according to the group’s website’s GitHub repository

The full scope of the investigation remains unknown at the reporting time. According to the GitHub commit dated Feb.26, 2024, “we have received a voluntary inquiry from a state authority that included a requirement for confidentiality”. 

The vagueness spurred theories about the occurrence, most adopted being the SEC’s involvement in probing Ethereum amid potential Ether ETF pre-inspection. The presumption was first brought up by Fortune, explaining that the Securities and Exchange Commission is seeking to classify ETH as a security. 

Fortune’s report also clarifies that the SEC has sent investigative subpoenas to U.S. companies in the past several weeks. 


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The rumored action of the financial regulator was perceived as an outcome of major implications for Ethereum, an Ether ETF, and crypto as a whole. The positive potential of the occurrence may spread to Whitechain, Polygon, and other networks, with financial institutions finally adopting ones. 

Possible Reasons Behind

An attorney familiar with the situation said to CoinDesk that a Swiss regulator may have served document requests to the Ethereum Foundation and several other companies in cooperation with the U.S. Securities and Exchange Commission (SEC). The initial motives for this remain unclear, while the news marked deep pessimism on the potential ETH ETF approval. 

James Seyfartt, Bloomberg Intelligence research analyst, noted that his “cautiously optimistic attitude for ETH ETFs has changed from recent months”, hinting at the Ethereum Foundation investigation. 


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Notably, he did not reject the possibility of ETH ETF approval, presuming that it is to be seen this fall. 

The dominating explanation of the Ethereum Foundation probe remains to be the deliberate halting of Ether ETF initiated by the SEC. 

This idea was voiced by Travis Kling – Chief Investment Officer (CIO) at Ikigai Asset Management. In his post for X, he claims it to be “a coordinated attack on ETH”:

“That’s interesting in light of Larry’s (Larry Fink, CEO at BlackRock) 576-1 record and the simple fact that he is unequivocally more powerful than Gary (Gensler, Chair of the SEC),” added Kling.

The uncertain status of Ether ETF was previously pointed out by Morgan Creek’s SEO Mark Yusko and JP Morgan’s analyst Nikolaos Panigirtzoglou. Both stressed the importance of defining Ether as a security to move further with exchange-traded funds approval. 

By contrast, many saw Ripple’s partial court victory regarding XRP status and constitution of many crypto tokens as commodities by CFTC Chair Ron Behnam as positive developments towards Ether ETF. 

In January, Fox Business journalist Eleanor Terrett expressed inclination towards certainty of ETH ETF approval, addressing the litigation with Binance. The hopes were expressed during one of the sessions that hinted at the recognition of DAO tokens as securities. 

Now the journalist believes the Ethereum Foundation inquiries as a reason why the “SEC has been so mum with the ETH spot ETF issuers”. 

“The SEC staff may be waiting for any lingering investigations to wrap before Gary Gensler gives them direction,” she stated in the post for X.

Political Footprint At Play?

Scott Jonnsson cited a “political factor” as one of the grounds for the “attack”. According to the lawyer, the SEC could be using the Ethereum Foundation probe to placate crypto skeptics who have demanded a tougher stance from the agency.

As per Cointelegraph’s report, earlier this month, Senators Jack Reed and Laphonza Butler urged Gary Gensler to halt any further spot crypto ETF approvals. Senator Elizabeth Warren has also been extremely vocal in her disapproval of the investment products. 

Scott Johnsson also presumed that the SEC could need a non-correlation objection to deny spot Ether ETFs with the help of the Ethereum Foundation investigation. He explains that this may be a temporary solution, as correlation levels are improving over time. 

Finally, Johnsson sees the SEC’s action as killing two birds with one stone: denying spot Ether ETFs while avoiding “undermining the arguments” in the body’s legal action against Coinbase and Binance

“…given (Ether ETF) approval would be the most stark/explicit endorsement of ETH’s non-security status to date, it did risk undermining CB/Binance and the SEC’s entire crypto theory broadly/permanently,” wrote Johnsson in his post for X. 

How SEC Reacts

In his latest interview with Bloomberg TV earlier this month, Gensler was asked about the status of ETH as a security, to which he replied in a rather obscure way.

“We do have filings in front of us. I’m not going to comment. (…) We find motivation in the present for the SEC to further an investigation into ETH security status as an additional pretense to deny approval Gensler stated particularly.  

The Ether ETF roadmap is yet to see significant developments. “Any rumors of any activity” that the SEC and its overseas counterparts are engaging in may be correlated with the May 23 deadline the SEC faces,” goes in a related attorney statement relayed by Coindesk.

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I am a crypto-enthusiast with 5-year experience in copywriting. Worked for web3 companies and cryptocurrency exchange, which drove my keen interest towards the industry. Been writing for different publications on cryptocurrency, technology, economics and politics.