Ethereum’s upcoming Merge could make the second-largest blockchain greener, faster and cheaper. But a law professor says it could also create regulatory headaches by transforming ether (ETH), the network’s native asset, into a security under U.S. law.
“After the Merge, there will be a strong case that ether will be a security. The token in any proof-of-stake system is likely to be a security,” tweeted Georgetown Law professor Adam Levitin on July 23.
If Levitin is right, and, more importantly, if the U.S. Securities and Exchange Commission (SEC) shares his view, exchanges that list ether (and that would be nearly all of them) would be subject to more onerous regulatory requirements. Like the bitcoin (BTC) cryptocurrency, ether has until now been treated as a commodity, outside the SEC’s jurisdiction.
Most chatter in the Ethereum ecosystem has concerned technical aspects of a post-Merge proof-of-stake network rather than such legal questions. Goerli, a software update expected to take place Wednesday, is the final test before the second-largest blockchain fully transitions from the more energy-intensive proof-of-work to proof-of-stake. The switch is expected to be complete by October.