Ethereum could be classified as safe after the Merge event according to recent SEC reports which we read more about in today’s news. latest Ethereum news.
A recent SEC insider trading lawsuit has reignited discussions about which crypto assets should be considered securities and whether Ethereum could be classified as such post-merger. Some argue that ETH passes the Howey test due to the way it was launched and its PoS transition. ETH players earn revenue by validating blocks on the network, so there is an argument that investors will buy the asset expecting a profit, but a security classification from the SEC seemed little likely.
Prior to the launch of Ethereum in 2015, the network sold its native ETH token through an Initial Coin Offering and 50 million ETH were sold during the ICO at that time. In its early years, many argued that ETH passed the SEC Howey test which is used to assess whether or not an asset is a security. The test aims to determine whether a given transaction is an investment contract according to three criteria.
The foundation sold the ETH directly to the public, which means it met the money investment requirement. The Ethereum network for which ETH is the currency required direct input from over 100 developers to get started. Finally, the ICO took place in 2014 before the launch in 2015, suggesting that investors had a reasonable expectation that purchased ETH would increase in value once the network launched. However, despite the ambiguity over Ethereum’s status as a security, the SEC has since weighed in on the status of the network and the SEC’s former director of corporate finance. William Hinman we read that:
“…apart from the fundraising that accompanied the creation of Ether, based on my understanding of the current state of Ether, the Ethereum network and its decentralized structure, the current bids and sells of ‘Ether are not securities transactions.’
While Hinman’s comments caused ETH to fear that it could be labeled as a security, the network’s next Mege revived the discussion. The update is scheduled for September this year and it will change the underlying structure of how the network works. The current PoW system will be replaced by a PoS validation mechanism. The merger’s protocol changes may rekindle ambiguity over whether or not ETH is a security and the recent lawsuit has only helped the SEC clarify its position on what assets qualify as securities.
The language of the lawsuit expanded the definition of security described in the Howey test and explained the SEC’s view whether the organization that issued these assets has withdrawn from development so that the asset is not not able to continue to operate and be considered a Security. The SEC argued that RLY, DDX, AMP, RGT, LCX, and POWR are all fully considered securities. The combination of new SEC filings and the merger has challenged the issues. Will the SEC Classify Ethereum as a Security Sooner?
DC Forecasts is a leader in many crypto news categories, striving to achieve the highest journalistic standards and adhering to a strict set of editorial policies. If you are interested in offering your expertise or contributing to our news site, please do not hesitate to contact us at [email protected]