Coinbase’s Chief Legal Officer, Paul Grewal, has taken to social media to counter recent reporting about the U.S. Securities and Exchange Commission’s (SEC) potential classification of Ethereum (ETH) as a security. Grewal’s strongly-worded response comes as the crypto community anxiously awaits a decision on proposed spot Ethereum ETFs.

A Fortune report published on March 20 suggests the SEC is ramping up its investigation into whether Ether should be classified as a security. The report details that several U.S. companies have received subpoenas demanding documents and records related to their dealings with the Ethereum Foundation, the non-profit overseeing the blockchain’s development. According to Fortune, a key factor is Ethereum’s 2022 shift to a proof-of-stake consensus mechanism. Sources familiar with the matter allege the SEC sees this move as a possible pretext to redefine Ethereum as a security, potentially jeopardizing long-awaited Ethereum ETF approvals.

In a lengthy thread on social media platform X, Paul Grewal refutes the implication that Ethereum’s status is in question. He stresses that millions of Americans hold ETH, underscoring its significance within the crypto space since 2015. He suggests the SEC is contradicting itself, mentioning that senior SEC officials like Director of Corporation Finance William Hinman’s have previously acknowledged ETH is not a security. Grewal goes further, referencing SEC Chair Gary Gensler’s own Congressional testimony (in July 2018, which was before he became the SEC Chair), classifying ETH as a commodity rather than a security.

Grewal highlights recent court filings where SEC trial lawyers compared ETH to BTC, implying they understand the similarities between the two. He points out that both the CFTC and federal courts have consistently treated ETH as a commodity and that CFTC approval of ETH futures contracts back in 2021 only reinforces this classification. Grewal asserts that Ether fails to meet the Howey Test definition of a security due to its decentralized nature and that the recent shift to proof-of-stake has not changed this fact.

In conclusion, Grewal accuses the SEC of attempting to invent a flimsy justification for denying spot Ethereum ETF applications. He emphasizes that US investors deserve regulatory clarity, not confusing mixed messages on a well-established asset like Ethereum.

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