A U.S. appeals court has dismissed a lawsuit against the U.S. Securities and Exchange Commission that sought to force the SEC to take a formal position on whether ether and the Ethereum network are classified as securities or commodities.
The lawsuit, filed by cryptocurrency law firm Hodl Law, was intended as a preemptive measure, given that the SEC has already taken action against several cryptocurrency services, alleging that they were operating as unauthorized securities brokers.
Hodl Law argued that because it trades ether on the Ethereum blockchain, there was a “real risk” that the company would face enforcement action from the SEC in the future. However, a three-judge panel found no indication that the SEC ever considered taking action against Hodl.
According to Cointelegraph, the judges also noted that if the SEC were to decide that Ethereum transactions violated securities law, Hodl Law would be in violation based on its current activities. Additionally, the judges said that Hodl Law has no authority to compel the SEC to create regulations or even respond to their requests.
Indefinite calendar
Following the approval and launch of Ether ETFs earlier this year, there was cautious optimism that the SEC would hold off on further enforcement action. The approval of the Ether ETF came as a surprise, given the SEC’s previous objections to Ether and Ethereum, but that doesn’t mean there won’t be challenges in the future.
“The SEC has not taken a formal position on whether Ether or Ethereum is a ‘security’ within the meaning of the Securities Act, and it is possible that the Commission will never decide that Ether or Ethereum is a ‘security’ within the meaning of the Securities Act,” the judges wrote in their opinion.
Overshadowing the positive aspects
Regulatory uncertainty around cryptocurrencies has overshadowed an otherwise positive year. Following the launch of the Bitcoin ETF, Bitcoin hit an all-time high and institutional investors made significant investments in cryptocurrencies, blockchain and large-scale tokenization.
However, unease will likely persist within the crypto community until a more substantial regulatory framework is established.
“I don’t think the question we wanted answered is a onerous or extreme one: Does the use of the Ethereum network violate the federal securities laws?” Fred Rispoli, senior managing partner at Hodl Law, wrote in a post on X. “We won’t get that answer right now, but we have other ways to try to force the SEC to provide us with an answer. We’re not giving up.”
