Thorn speculates potential SEC classification of staked ETH as security in ETF proposals.

Alex Thorn, head of research at Galaxy Digital, has suggested that the U.S. Securities and Exchange Commission (SEC) may classify staked Ethereum as a security as a potential workaround to approve spot Ethereum exchange-traded funds (ETFs). In a recent post, Thorn proposed that the SEC could draw a distinction between Ethereum and staked Ethereum, potentially categorizing the latter as a security. This distinction could have significant implications for spot Ethereum ETFs, which the SEC has been hesitant to approve thus far. Thorn believes that this change in strategy would align with the SEC’s ongoing legal battles and investigations, allowing them to approve Ethereum ETFs while adhering to their previous arguments and positions. However, there may be specific restrictions imposed on spot Ethereum ETFs. By differentiating between ETH and staked ETH, the SEC could navigate the complex regulatory landscape and potentially introduce Ethereum ETFs while maintaining a strict regulatory framework for staked assets and other altcoins. It remains unclear how the SEC would treat tokenized versions of Ethereum or Bitcoin used in layer-2 solutions. Following this news, Ethereum experienced a surge of over 17%, despite initial market consensus suggesting that the SEC would not approve spot ETH ETFs. Bloomberg senior analyst Eric Balchunas, who previously believed the odds of approval were slim, has now revised his stance, raising the chance of approval from 25% to 75%. This suggests that the SEC’s accelerated pace in approving the ETF may be a response to political pressure, as their previous engagement with ETF applicants was limited.