The ongoing regulatory struggle over Ethereum ETFs seems to be approaching its logical conclusion. The final approval for Ethereum (ETH) trading exchange-traded funds (ETFs) is expected to be completed this summer, declared Gary Gensler, the chairman of the U.S. Securities and Exchange Commission (SEC), to senators at a budget hearing on Thursday.
Previously, the agency had greenlight the initial round of applications, but Gensler stated that the final registration requirements – applications known as S-1 – are now being processed at the “staff level.” Addressing a Senate Appropriations Subcommittee at the budget justification hearing for the market regulator, Gensler noted that the process is “running smoothly” after the approval of the ETF group.
SEC had initially thwarted efforts for a Bitcoin ETF until a federal court ruled that the agency was mishandling the matter. Gensler mentioned that since then, the SEC has been following that decision and allowing them.
With the approval of these applications, new ETFs could be listed, opening up broader markets for exchange-traded funds that hold actual ether, much akin to the earlier creation of Bitcoin spot ETFs that hold BTC.
Challenges and Perspectives from Gensler and Behnam
Gensler repeated his complaints about the crypto industry falling short of standards and stated that the Commodity Futures Trading Commission (CFTC) isn’t ready to wrangle crypto markets. CFTC Chairman Rostin Behnam also shared his agency’s efforts to ban selective contracts in prediction markets.
When directly questioned about whether ETH qualifies as a commodity, Gensler sidestepped with neither an affirmative nor negative response, opting to uphold his agency’s ambiguous position on the asset. At the same hearing, when asked if it’s a commodity, Behnam responded with a firm “Yes.”
This question is crucial in determining the appropriate American watchdog for various tokens. SEC will oversee security tokens, while CFTC will wield authority over the rest. Though Gensler has repeatedly claimed that the vast majority of digital assets should be deemed securities, he refuses to categorize which ones fit into which basket, except for those his agency has listed in enforcement actions.
Related: Bitcoin Critically Fell After the ETF Approval. What’s Next?
“While not all cryptocurrencies are security tokens — some fall under Chairman Behnam’s jurisdiction — those that are must disclose information to the public,” said Gensler, echoing his argument that most tokens remain unregistered and violate securities laws.
Behnam noted that CFTC still lacks some necessary powers to oversee cryptocurrency markets, unless — as legislative efforts in Congress undoubtedly prescribe — it gains more responsibility for regulating crypto trading.
“We don’t have those traditional regulatory tools — registration, custody, surveillance, oversight — that truly made American capital markets and derivatives markets so robust,” he said, adding that CFTC will need a larger budget for that to happen.
Gensler, who has chaired both agencies, said the industry has “thumbed its nose” to the rules. He also speculated that CFTC is currently unprepared for a disclosure-based oversight system because it’s not what they do, unlike the SEC.
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Behnam’s unambiguous stance, coupled with Gensler’s cautious approach, highlights the complexity that still permeates cryptocurrency regulation. As the SEC and CFTC navigate their respective roles, we are watching closely, hoping for clearer guidelines and more robust oversight.
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