The hopes for a potential Ethereum ETF are diminishing as reports indicate that the United States Securities and Exchange Commission (SEC) is conducting an investigation into the Ethereum Foundation. According to a report from Fortune, the SEC is looking into classifying Ethereum’s native coin, ETH, as a security.
Confirmation of the investigation can be found in a post on the Ethereum Foundation’s Github repository, dated February 26th. The Swiss non-profit organization has acknowledged the voluntary inquiry from a state authority, which comes with a requirement for confidentiality.
Sources familiar with the situation reveal that the SEC began its investigation shortly after “the Merge,” an event in September 2022 that saw the Ethereum network transition from Proof of Work (PoW) to Proof of Stake (PoS). These sources also indicate that the SEC views this transition as an opportunity to classify Ethereum as a security. The anonymous sources further disclose that the SEC has sent multiple investigative subpoenas to the Swiss-based organization in recent weeks.
It is worth noting that the Ethereum Foundation has violated its commitment to not conceal any external investigations from state authorities. The foundation’s website clearly states that it will publicly disclose any inquiries from government agencies that fall outside the scope of regular business operations.
The ongoing investigation has likely dampened the prospects of the SEC approving a spot Ethereum exchange-traded fund (ETF) by the expected deadline of May 23. If the question of whether ETH is a security persists, the SEC may choose to delay or reject Ether ETF products.
Analysts who have been following the potential spot Ether ETF have expressed skepticism about the SEC’s approval before the final deadline. They point to a lack of communication between the US regulator and applicants, similar to what was observed prior to the approval of the spot Bitcoin ETF in January.
Following the news of the investigation, the price of Ethereum experienced a drop of over 8% to $3,175, but it later recovered to $3,329. The token has seen a decline of over 16% this week, primarily due to the overall downward trend in the market.
Tags: Ethereum, Ethereum ETF, SEC
