SEC’s Potential Classification of Staked Ether as Security Sparks Concerns Amid Speculation of Ethereum ETF Approval

SEC’s Potential Classification of Staked Ether as Security Sparks Concerns Amid Speculation of Ethereum ETF Approval

Alex Thorn, head of research at Galaxy Research, has raised concerns about the United States Securities and Exchange Commission (SEC) potentially classifying staked Ether as a security. His speculation comes amid growing expectations that the SEC may soon approve spot Ether exchange-traded funds (ETFs).

“If the speculation about a 180 from the SEC on the Ethereum ETFs is true, I would guess they might try to differentiate between ‘ETH’ not being a security and ‘staked ETH’ (or even more tenuously, ‘staking as a service ETH’) being classified as a security,” Thorn remarked.

Thorn suggested that the strategic shift to approve a spot Ether ETF could be “somewhat consistent” with previous court rulings:

“[…] as well as with reports about their various investigations, and perhaps allow the SEC to approve Ethereum ETFs while maintaining their previously stated positions.”

In response to Thorn’s post on X, a community member raised an additional concern about whether staking Ether within an ETF would create liquidity challenges, complicating regulatory compliance.

Thorn admitted he was “not sure” but addressed the concern by noting that lending ETF collateral usually has limits, which might serve as a point of comparison. He also mentioned that European exchange-traded products (ETPs) provide staking services.

Historically, the SEC has aimed to classify Ether as a security, a trend that continues. This is evidenced by a recent report from Fox Business producer Eleanor Terret.

Terret, citing court documents filed by Consensys on April 29, indicated that the SEC and its Chair Gary Gensler had believed “for at least a year” that Ether was an unregistered security.

According to Bloomberg senior analyst Eric Balchunas, on May 20, despite the ongoing debate over approval and rejection, the approval odds for an Ethereum ETF were raised from 25% to 75%.

This significant shift occurred after Balchunas heard “rumors […] that [the] SEC might be reversing its stance” on the matter as it becomes an “increasingly political issue.”