As the cryptocurrency community eagerly awaits the US Securities and Exchange Commission's (SEC) decision on Ethereum Spot Exchange-Traded Funds (ETFs), a finance lawyer has raised concerns over the Commission's potential classification of Ethereum as a security. Scott Johnsson highlights that the SEC may consider Ethereum's security status when making its ruling, particularly on May 31.

Johnsson points out that the SEC has raised questions about whether Ethereum Trust shares should be listed and traded under Nasdaq Rule 5711(d), which defines Commodity-Based Trust Shares as securities. This suggests that the SEC might be considering classifying ETH as a security, which could pose a significant hurdle to ETF approval. Unlike Bitcoin, which was approved without such scrutiny, Ethereum faces this additional challenge.

The lawyer notes that the SEC is required to provide notice of the grounds for rejection under consideration, and the question of Ethereum's security status was raised in every ETH spot ETF filing. Johnsson believes that the SEC may reject Ethereum spot ETFs if they are deemed to be holding securities and were filed incorrectly as commodity-based trust shares.

Before the May 31 deadline, the SEC is expected to provide a detailed analysis of whether an Ethereum spot ETF complies with Exchange Act regulations. This will be the final agency action that can be reviewed before the deadline, and the regulatory watchdog has several options available, each with far-reaching consequences. The cryptocurrency community is closely watching the development, aware that the outcome will have significant implications for the future of Ethereum and the broader crypto space.