Apr 01, 2024

A16z Predicts SEC Legal Tussle with Ethereum Foundation to End in Gigantic Failure

Brief Overview The latest development in the crypto industry is the news of the US Securities and Exchange Commission (SEC) launching a legal investigation against Ethereum. However, Andreessen Horowitz (A16z), a venture capital firm in Silicon Valley, has predicted that the latest US government effort will fail. A16z Backs Ethereum, Predicts SEC Legal Campaign to…

Brief Overview

  • News of state legal investigations against Ethereum led by the US Securities and Exchange Commission breaks out.
  • Brian Quintenz, Andreessen Horowitz (A16z)’s head of Global Policy, powerfully states that the SEC will fail.
  • Sam Kessler of CoinDesk, in an interview, unveils the potential adverse effects if the US SEC classifies Ethereum as a security.

The latest development in the crypto industry is the news of the US Securities and Exchange Commission (SEC) launching a legal investigation against Ethereum.

However, Andreessen Horowitz (A16z), a venture capital firm in Silicon Valley, has predicted that the latest US government effort will fail.

The Ethereum Foundation, a Swiss-based non-profit that supports ETH, was recently hit with a state inquiry led by the SEC. Many analysts and experts have linked the latest government inquiry to a calculated effort to derail spot Ethereum ETF approval this year.

According to A16z head of Global Policy Brian Quintenz, the potential legal tussle between Ethereum and the SEC will fail for the latter. Quintenz immediately took to Twitter, now X, to share his views, stating that the SEC was already aware that ETH doesn’t have a security status.

“Reminder: When the SEC allowed ETH Futures ETFs to trade on its regulated security exchanges, it explicitly acknowledged the status of the underlying, ETH, as being a non-security and outside of its jurisdiction,” Quintenz stated on Twitter.

Quintenz, in his argument, discussed the timing of the SEC’s investigations on Ethereum. He said the new development regarding ETH came after its blockchain transitioned to a proof-of-stake (PoS) governance model, a milestone that was achieved in 2022. However, the SEC still approved ETH Futures ETF in 2023 despite the change in governance model. Thus, Quintenz argues that assuming the US SEC had issues with Ethereum being a security, they wouldn’t have approved the Futures ETF.

What Does the Government Enquiry Mean For Ethereum?

In a First Mover interview with CoinDesk on YouTube, Sam Kessler discussed the bad effects the state inquiry would have on Ethereum. During the interview, he said the US SEC might have reached out to the Ethereum Foundation about three weeks ago since their warrant canary was allegedly removed within the same period.

Apparently, Sam Kessler’s conclusions look similar to those of Quintenz. Kessler said the SEC’s inquiry on the Ethereum Foundation was explicitly related to halting the approval of the spot Ethereum ETFs.

“One imagines the timing of these inquiries, um, if not explicitly related to trying to put a halt on these approvals, is tied to them wanting to kind of use the looming… pending approvals as a kind of like doorway into doing these broader investigations,” Kessler said in the interview.

Kessler admitted that the new investigations might negatively impact ETH if the SEC had succeeded in classifying it as a security. He said traders and investors alike will be uncertain about Ethereum. His points were that they would be confused about how Ethereum can be traded and the venues to trade it.

At press time, Ethereum was trading above $3,500 after falling to a $3,412 low in reaction to the US government’s ongoing investigations. The trading volume also took a hit, reducing to about $21 billion, while the market valuation remained above $420 billion, only second to Bitcoin.

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