We now live in a post-merge world. And, following the recent significant changes to the platform, the exchange commission is taking another look at it. According to reports, Chairman Gary Gensler suggested that it could now be a security for the first time after the merger. 

On the one hand, mining could have been the factor that kept the organization from being classified as an unregistered security. There is no mining after the merge, and the massive premise at the start of Ethereum remains the issue.

Validators who are the miner's replacements do not receive dividends. The reward is paid for their efforts. Staking would not be considered an investment under that lens.

They stated years ago that Ethereum is a commodity, not a security. Nevertheless, the changes were significant. After the merge, the platform is a completely different animal. Does Chairman Gary Gensler of the Securities and Exchange Commission see it as a target? Or are people exaggerating his words?

What did chairman Gensler conclude about a post-merger? In fact, nothing. His statements were all about cryptocurrencies overall. However, following a congressional hearing, he told reporters, "from the coin's perspective...another that's an indication that, according to the Howey test, the investing public expects profits based on the efforts of others."

But what exactly is the Howey test? As per Investopedia, the Howey test refers to four criteria to evaluate whether an investment contract exists, established by the Supreme Court in the case "SEC v. W.J. Howey Co." found in 1946. 

According to Gabor Gurbacs, Strategy Advisor at VanEck, Ethereum was bound to attract regulatory scrutiny following the merger, even if it is not a security.

Is staking like lending?

The WSJ contextualized Chairman Gensler's brief but telling phrase: "If an intermediary like a crypto exchange offers staking services to its customers," Mr. Gensler explained, it "looks very similar—with some labeling changes—to lending."

At first glance, it appears to be a stretch, but the staker lends its ETH to the exchange and receives dividends in return. Perhaps there is a case to be made against post-merge Ethereum. Adam Cochran, a professor, investor, and marketing/strategy executive, disagrees. "At first glance, the concept of "buy token, stake token, earn token" can appear to be a security - I understand that," he concludes after a compelling and elaborate thread.

Gurbacs, who made a statement about Ethereum, concluded: "In my opinion, computer programs that are not used to raise funds or promise dividends should not be classified as securities. Tokens and small businesses require a simpler and less expensive regulatory framework in order to register. The current system is complex and expensive."

What do you think about the recent reports of the SEC investigating ETH for being under proof-of-stake? Comment your opinion on social media by sharing this article on social media.

Sep 16, 2022
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