Over the last several months, we have heard repeatedly that the Commission, and its new Crypto Task Force, are embarking on a quest to give the crypto industry regulatory clarity.[1] We’ve heard “change is coming fast” [2] for crypto at the SEC and that the crypto markets will soon be free from the “limbo” they’ve been “languishing […] in for years.”[3]
In the name of this clarity, we’ve seen staff statement after staff statement, pronouncing that all sorts of crypto assets are not securities.[4] And yet, now we see no objection to the effectiveness of new exchange-traded funds[5] that assert certain crypto assets—ETH and SOL—actually are securities.[6] Does this Commission, in fact, believe that ETH and SOL are securities?
How is it that these crypto assets are supposedly not securities when it comes to registration requirements, but conveniently are securities when a registrant sees an opportunity to sell a new product?
If you’re confused, join the club. These developments lay bare that we are not actually chasing crypto regulatory clarity -- these assets cannot be both securities and not securities at the exact same time.[7] Rather than clarity, it seems we are simply getting out of the way of anything and everything in the crypto space. In so doing, we are thwarting any meaningful attempt to apply a coherent regime to crypto assets and rewarding a maximally aggressive approach to entering our markets. This results in opportunistic – and deeply inconsistent – legal interpretations. Even our staff can’t reconcile these inconsistencies, though their concerns don’t seem to matter much these days.[8]
So far, the Commission and The Crypto Task Force’s journey to clarity has only taken us further and further adrift in increasingly muddy waters of our own making.
[1] See Commissioner Hester M. Peirce, The Journey Begins (Feb. 4, 2025); SEC Press Release 2025-30, SEC Crypto 2.0: Acting Chairman Uyeda Announces Formation of New Crypto Task Force (Jan. 21, 2025)(The SEC Crypto Task Force will be “dedicated to developing a comprehensive and clear regulatory framework,” and it will provide “clarity regarding who must register,” in place of the current “confusion about what is legal.”).
[2] See Commissioner Hester M. Peirce, New Paradigm: Remarks at SEC Speaks, (May 19, 2025).
[3] See Chairman Paul S. Atkins, Prepared Remarks at SEC Speaks (May 19, 2025).
[4] See U.S. Securities & Exchange Commission Division of Corporation Finance,Staff Statement on Meme Coins, (Feb. 27, 2025); U.S. Securities & Exchange Commission Division of Corporation Finance,Statement on Certain Proof of Work Mining Activities, (Mar. 20, 2025); U.S. Securities & Exchange Commission Division of Corporation Finance,Statement on Stablecoins, (Apr. 4, 2025). See also Commissioner Caroline A. Crenshaw,Response to Staff Statement on Meme Coins: What Does it Meme?(Feb. 27, 2025); Commissioner Caroline A. Crenshaw,Crypto Mining Statement: The Flame in Plato’s Cave, (Mar. 20, 2025); Commissioner Caroline A. Crenshaw,“Stable” Coins or Risky Business?, (Apr. 4, 2025). See generally Commissioner Hester M. Peirce, New Paradigm: Remarks at SEC Speaks, (May 19, 2025) (citing the Commissioner’s view that “most currently existing crypto assets in the market are not [securities]”).
[5] See ETF Opportunities Trust, Form N-1A (May 30, 2025) available at https://www.sec.gov/ix?doc=/Archives/edgar/data/1771146/000199937125006935/osprey-485bpos_053025.htm (485BPOS post-effective amendment registering two new ETFs: Rex-Osprey ETH + Staking ETF and the Rex-Osprey SOL + Staking ETF). Importantly, these products are exchange-traded funds (ETFs) that purport to be registered under the Investment Company Act of 1940. These products are different than, but often conflated with, exchange-traded products (ETPs) that are separately approved to list and trade under the Exchange Act of 1934. In the ETP space, products are approved to list and trade on exchanges based on the fact that the underlying assets are generally not securities, such as ETH. See, e.g., Securities and Exchange Act Release No. 100541 (July 17, 2024,) 89 FR 59786 (July 23, 2024); see also Securities and Exchange Act Release No.100233 (May 28, 2024), 89 FR 47618 (June 3, 2024). In contrast, registered investment companies, including ETFs, generally must invest primarily in securities. See 15 U.S.C. § 80a-3(a)(1)(A)-(C) (providing the definition of an “investment company” and generally identifying an issuer as an investment company if it invests in securities in the manners described in subsections (A) or (C)). With yesterday’s new ETFs, we have both an ETH ETP and ETH ETF. How can both of these products be in compliance with the securities laws? See also Commissioner Caroline A. Crenshaw, Statement Dissenting from Approval of Proposed Rule Changes to List and Trade Spot Bitcoin Exchange-Traded Products (Jan. 10, 2024).
[6] See id.
[7] While the 1933 Act and the 1940 Act are distinct regulatory regimes, except in specific, rare circumstances identified by the staff or by a court, the two Acts generally treat questions of security status the same. This parity creates consistency across the federal securities laws. See, e.g., Marine Bank v. Weaver, 455 U.S. 551 (1982); Putnam Diversified Premium Income Trust, SEC No-Action Letter (July 10, 1989).
[8] SEC staff provided a letter via EDGAR to a registrant in response to two new ETFs, Rex-Osprey ETH + Staking ETF and the Rex-Osprey SOL + Staking ETF. The letter explains that the registrant allowed the funds’ registration statement to become effective despite significant unresolved comments from staff in the Division of Investment Management. These outstanding issues include concerns that the funds may not meet the definition of an investment company and that related disclosure in the registration statement may be potentially misleading, among other issues. It is to the detriment of market participants and investors when the staff’s review is not met with good faith engagement and comments are not fully resolved prior to effectiveness. See SEC EDGAR Correspondence, ETF Opportunities Trust (May 30, 2025) available at https://www.sec.gov/Archives/edgar/data/1771146/000000000025005772/filename1.pdf. It is further to the detriment of the market when the Commission fails to use its tools to stop funds from introducing such uncertainty.
