The recent crackdown on platforms that mix cryptocurrencies, such as Tornado Cash, has raised concerns about the U.S. Securities and Exchange Commission’s (SEC) potential overreach in its efforts to regulate the crypto industry. In addition, the SEC’s expected rejection of Ethereum exchange-traded funds (ETFs) indicates its regulatory stance, despite efforts from companies like BlackRock and Grayscale.
Following its case against Ripple, the SEC has been expanding its reach in the crypto regulatory market. It has filed lawsuits against major crypto firms like Coinbase and Binance. The recent crackdown on platforms like Tornado Cash has led many to question whether the SEC is going too far in its attempts to regulate the crypto industry.
One issue that has contributed to the uncertainty surrounding the legal status of tokens is the lack of consistency in legal rulings regarding their classification as investment contracts. The Ripple case, for example, saw Judge Torres and Judge Failla issue differing rulings, further adding to the confusion.
Amidst this uncertainty, two SEC lawyers recently resigned following a federal judge’s sanctioning and strong criticism of the SEC for its alleged abuse of power in a crypto-related case. Michael Welsh and Joseph Watkins, who were lead attorneys in a case against DEBT Box, stepped down from their positions at the SEC. Crypto lawyer Jake Chevinsky believes that this resignation will irreparably damage the SEC’s reputation.
Similar to its actions against Ripple, the SEC has also been targeting Ethereum to bring it under securities laws. The SEC’s expected rejection of spot Ethereum ETFs further supports this regulatory stance. Sources familiar with the matter indicate that the SEC is likely to deny the approval of spot Ethereum ETFs following recent meetings with issuers. Prominent companies like BlackRock, Grayscale, VanEck, and Ark Invest have all applied for approval to list ETFs tracking the spot prices of Ethereum. However, insiders have revealed that the SEC has shown little interest in these proposals, signaling a lack of enthusiasm from the regulatory side.
Overall, the SEC’s actions and potential overreach in regulating the crypto industry, as well as its expected rejection of Ethereum ETFs, have raised concerns about its regulatory stance and the uncertainty surrounding the legal status of tokens.