Galaxy Digital’s Alex Thorn suggests that the SEC might classify staked Ethereum as a security to pave the way for approving a spot Ethereum ETF. This potential move by the U.S. Securities and Exchange Commission (SEC) could significantly impact the crypto market.

According to Alex Thorn, head of research at Galaxy Digital, the SEC might differentiate between Ethereum and staked Ethereum. Thorn speculated on social media that the SEC could categorize staked Ethereum as a security, while leaving Ethereum itself unclassified in this regard. This nuanced distinction could facilitate the approval of Ethereum ETFs.

“If the speculation about a 180 from SEC on the Ethereum ETFs is true, I would guess they try to thread a needle between ‘ETH’ NOT being a security and ‘staked ETH’ (or even more flimsily, ‘staking as a service ETH’) as BEING a security.”

This differentiation could have significant implications for spot Ethereum ETFs, which the SEC has been hesitant to approve so far. Thorn believes that this change of strategy aligns with the SEC’s ongoing legal battles and investigations, allowing the commission to approve Ethereum ETFs while adhering to its previous arguments and positions. However, this approach might also involve specific restrictions on spot Ethereum ETFs.

“In this case and perhaps for other reasons, you would expect SEC to prohibit the ETFs from staking the ETH they hold.”

By distinguishing between ETH and staked ETH, the SEC could navigate the complex regulatory landscape, potentially allowing for the introduction of Ethereum ETFs while maintaining a strict regulatory framework around staked assets and other altcoins. However, it remains unclear how the SEC would treat tokenized versions of Ethereum or Bitcoin for usage in layer-2 solutions, including lending.

Meanwhile, Ethereum surged by over 17% following news that the SEC might approve spot ETH ETFs, despite previous market consensus that the watchdog wouldn’t give the green light. Bloomberg senior analyst Eric Balchunas, who previously said the odds of spot Ethereum ETF approval were “slim to none,” revised his stance. In a social media post, he increased the chance of approval from 25% to 75%, suggesting that the SEC’s quickening pace might be due to political pressure.

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