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Recently, Ethereum developer Consensys sued the US Securities and Exchange Commission (SEC) in a landmark case that could redefine the future of cryptocurrencies. The developer is seeking a declaration that ETH is not a security.
The legal battle, which started last week, is expected to last a long time, according to investment bank TD Cowen. The bank reiterated its view that spot Ethereum ETFs are unlikely to gain approval before 2025.
“We believe litigation will take years, and our view remains that the SEC is unlikely to approve Ethereum ETFs before 2025,” TD Cowen Washington Research Group, led by Jaret Seiberg, said in a note published today.
Interestingly, SEC Chairman Gary Gensler reportedly “agreed” to let the court decide whether ETH is a security or a commodity. “As we noted in our previous notes, we believe Gensler wants the courts to define how the law applies to crypto before Congress enacts crypto market structure legislation,” the bank said.
TD Cowen rates the case as “positive” as Consensys raises fundamental issues that need to be resolved. According to the bank, SEC officials had previously said Ethereum was not a security, but Gensler refused to comment on the matter, creating an uncertainty that needed to be resolved.
The legal battle is expected to take “years rather than months” to resolve. TD Cowen said that even if Consensys could get an interim injunction, it would not be definitive. “And we doubt a court would want to block crypto oversight given previous industry controversies,” he added.
The Northern District of Texas, the court Consensys chose for the case and which “shows the least respect for regulators,” also “does not guarantee a speedy outcome,” according to TD Cowen.
TD Cowen reiterated on June 11 that he does not expect the SEC to approve spot Ethereum ETFs when the next deadlines come. Instead, he thinks the process is being postponed until after the election because he expects legal and political pressure to increase in the second half of this year, regardless of who wins in November:
“We had argued that an Ethereum ETF could take more than a year after the SEC approved Bitcoin ETFs. “In our view, while SEC Chairman Gensler is forced to act on Bitcoin, he is not under similar pressure on the Ethereum ETF.”
*This is not investment advice.