Ether is being treated as a commodity in practice, but no U.S. statute has formally settled whether ETH is a security or a commodity. The SEC closed its Ethereum 2.0 investigation in June 2024, spot Ether ETFs now trade on U.S. exchanges as commodity-based trust products, CFTC-regulated Ether futures have been listed for years, and current SEC Chairman Paul Atkins has said publicly that “most crypto tokens trading today are not themselves securities.”1U.S. Securities and Exchange Commission. The SEC’s Approach to Digital Assets: Inside “Project Crypto” The classification still rests on agency interpretation and court rulings rather than clear statutory text, and a future administration could revisit it.
Why the Classification Matters
The label decides which agency has jurisdiction and what rules apply. If ETH is a security, the SEC oversees it, and every U.S. exchange listing the token would need to register as a securities exchange or delist. Section 12(a) of the Securities Exchange Act makes it unlawful for any broker or dealer to trade a security on a national exchange unless that security is registered.2U.S. Securities and Exchange Commission. Removal From Listing and Registration of Securities Pursuant to Section 12(d) of the Securities Exchange Act of 1934 Buyers could theoretically assert rescission rights under Section 12(a)(1) of the Securities Act for unregistered sales, and issuers, staking services, and DeFi protocols would face fresh liability.
If ETH is a commodity, the CFTC has jurisdiction over derivatives and anti-fraud authority over the spot market, but no equivalent to securities registration applies to day-to-day trading of the token itself.
The Howey Test
Whether a digital asset qualifies as a security depends on the Howey Test, a framework the Supreme Court established in 1946. Under Howey, a transaction is an “investment contract” (and therefore a security) when someone invests money in a common enterprise and expects profits primarily from the efforts of others.3Justia U.S. Supreme Court Center. SEC v. W.J. Howey Co. All prongs must be satisfied. If any one fails, the transaction is not a securities offering.
The SEC applied this framework to digital assets in a 2019 staff document that emphasizes the “efforts of others” prong. When a token’s value depends on a central team building and marketing the network, the token looks like a security. When the network is mature and decentralized enough that no single group drives its value, the analysis shifts.4U.S. Securities and Exchange Commission. Framework for Investment Contract Analysis of Digital Assets
The Commodity Exchange Act, meanwhile, defines “commodity” broadly enough to reach digital assets through its catch-all for “all other goods and articles” and “all services, rights, and interests” in which futures contracts are dealt.5Office of the Law Revision Counsel. 7 U.S. Code 1a – Definitions
The Case That ETH Was Once a Security
The strongest argument for treating ETH as a security comes from its earliest days. In July 2014, the Ethereum Foundation conducted a public token sale to fund development of the network. Buyers paid Bitcoin to receive Ether at a starting rate of 2,000 ETH per BTC, with the price declining over a 42-day sale window.6Ethereum Foundation Blog. Launching the Ether Sale The Foundation published a development roadmap and an “Intended Use of Revenue” document alongside the sale.
Run that transaction through Howey and it checks every box. Buyers invested money. Funds were pooled into a common enterprise. Purchasers expected the token to appreciate as the network was built. Success depended on a small team of developers who had not yet launched the product. Viewed in isolation, the 2014 sale looks like an unregistered securities offering.
The Case That ETH Is Now a Commodity
The legal picture changed as Ethereum matured, and several developments now point in the commodity direction.
Sufficient Decentralization
In a June 2018 speech, William Hinman, then director of the SEC’s Division of Corporation Finance, argued that Howey analysis is not frozen in time. A token sold as part of an investment contract can later stop being a security if the network becomes decentralized enough that buyers no longer rely on a central group’s efforts for profit. Hinman said directly: “based on my understanding of the present state of Ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions.”7U.S. Securities and Exchange Commission. Digital Asset Transactions: When Howey Met Gary (Plastic)
That speech was not a formal SEC ruling, and Hinman’s successor Gary Gensler later distanced the agency from it. Atkins has since endorsed a similar logic, stating that once an investment contract “has run its course, or expires by its own terms, the token may continue to trade, but those trades are no longer ‘securities transactions’ simply by virtue of the token’s origin story.”1U.S. Securities and Exchange Commission. The SEC’s Approach to Digital Assets: Inside “Project Crypto”
CFTC-Regulated Ether Futures
While the SEC debated internally, the CFTC moved forward treating ETH as a commodity. Multiple regulated exchanges list CFTC-approved Ether futures, including Cboe Futures Exchange, which offers financially settled Ether futures under CFTC oversight.8Cboe. Financially Settled Cryptocurrency Futures The CFTC’s product database confirms several certified Ether futures products.9Commodity Futures Trading Commission. Designated Contract Market Products The CFTC has also labeled ETH a commodity in civil enforcement complaints against exchanges accused of operating unregistered derivatives platforms.
Spot Ether ETFs Approved as Commodity Trusts
In May 2024, the SEC approved rule changes allowing eight separate spot Ether ETFs to list on U.S. exchanges. The approval orders classified the ETF shares as “Commodity Based Trust Shares,” implicitly treating the underlying Ether as a commodity. The SEC did not include a discussion of ETH’s security status in the approval, but the classification spoke for itself.
Consensys, the company behind the MetaMask wallet, pressed the point in a June 7, 2024 letter arguing that approving commodity-based ETH ETFs was incompatible with investigating ETH as a security. Eleven days later, on June 18, the SEC’s Enforcement Division notified Consensys that it was closing its Ethereum 2.0 investigation and would not pursue enforcement.10Consensys. SEC Closes Ethereum 2.0 Investigation, Will Not Pursue Ethereum Enforcement
A Joint SEC-CFTC Statement
In a 2026 joint interpretation, the CFTC and SEC stated that “certain non-security crypto assets could meet the definition of ‘commodity’ under the CEA.”11Commodity Futures Trading Commission. CFTC Joins SEC to Clarify the Application of Federal Securities Laws to Crypto Assets This is the closest the two agencies have come to a coordinated position.
Staking Is a Separate Question
Ethereum’s shift to proof-of-stake in September 2022 added complexity that Howey was not designed for. ETH holders can lock up tokens to help validate transactions and earn rewards. If you run your own validator, you are doing the work yourself. Most holders instead hand their ETH to a third-party service that pools tokens, runs the infrastructure, and distributes rewards.
The SEC charged Kraken in February 2023 with offering an unregistered securities product through its staking-as-a-service program. The complaint alleged Kraken pooled customer assets, determined payout amounts at its own discretion, and advertised annual returns of up to 21 percent without securities disclosures. Kraken settled for $30 million and shut down its U.S. staking program.12U.S. Securities and Exchange Commission. Kraken to Discontinue Unregistered Offer and Sale of Crypto Asset Staking-as-a-Service Program
The distinction matters. The underlying ETH token can be a commodity while a centralized staking service that pools customer tokens and promises returns is treated as an unregistered securities offering. Gold is a commodity; a fund that pools investor gold and promises returns is a security. The asset and the service are separate questions. The SEC’s approvals of spot Ether ETFs reflected the same line: every issuer had to amend its registration to prohibit staking any Ether held by the fund.
The Ripple Ruling on Secondary Sales
A July 2023 federal court decision in SEC v. Ripple Labs gave crypto markets their most detailed judicial guidance on how Howey applies to token trading. Judge Analisa Torres of the Southern District of New York drew a sharp line between different types of transactions involving the same token. Direct sales to institutional investors who signed contracts with Ripple were securities transactions. “Programmatic sales” on exchanges, where buyers had no idea whether their money went to Ripple or another seller, were not.13United States District Court, Southern District of New York. SEC v. Ripple Labs, Inc.
The court held that “XRP, as a digital token, is not in and of itself a ‘contract, transaction, or scheme’ that embodies the Howey requirements of an investment contract.” The token is just a token; context matters. That logic supports the argument that even if ETH’s 2014 sale was a securities offering, that does not make every later ETH trade a securities transaction.
The SEC’s Current Direction
The regulatory posture shifted after Gary Gensler resigned as SEC Chair in January 2025. Under Gensler, the SEC took an enforcement-first approach and declined to provide clear classification guidance. Atkins has called on the Commission to create “realistic paths to registration” and “sensible disclosure frameworks” rather than regulate through litigation.1U.S. Securities and Exchange Commission. The SEC’s Approach to Digital Assets: Inside “Project Crypto”
In January 2025, Acting Chairman Mark Uyeda announced a Crypto Task Force led by Commissioner Hester Peirce to “draw clear regulatory lines” and coordinate with the CFTC and state regulators.14U.S. Securities and Exchange Commission. Acting Chairman Uyeda Announces Formation of New Crypto Task Force The SEC also began dismissing crypto enforcement actions brought under the prior administration, including its case against Coinbase.15U.S. Securities and Exchange Commission. SEC Announces Dismissal of Civil Enforcement Action Against Coinbase Atkins has outlined a “token taxonomy” that would place decentralized network tokens like ETH in a “digital commodities” bucket outside securities regulation. It is a policy position, not law, but it signals where the agency is heading.
Pending Legislation Would End the Debate
Congress has been working toward a statutory framework. The Financial Innovation and Technology for the 21st Century Act (FIT21) passed the House in May 2024 but did not clear the Senate before that Congress ended. A new version has been introduced in the 119th Congress.
FIT21 would create a formal process for determining whether a digital asset is a “digital commodity” or a “restricted digital asset” subject to SEC oversight. A token qualifies as a digital commodity if the network is decentralized: no single person controls the asset, no affiliated person owns more than 20 percent of tokens or voting power, no affiliated person can unilaterally change the source code, and the asset is not marketed as an investment contract. ETH would almost certainly qualify under those criteria. Until legislation passes, classification remains a matter of agency interpretation.
Tax Treatment Does Not Depend on the Answer
Whether ETH ends up labeled a security or commodity, tax obligations are the same. The IRS treats all digital assets as property. Selling, trading, or spending ETH triggers a taxable event, and any appreciation is subject to capital gains tax.
Staking rewards have their own rule. Under Revenue Ruling 2023-14, the fair market value of staking rewards counts as ordinary income in the year you gain “dominion and control” over the tokens, meaning you can sell, transfer, or use them without restriction.16Internal Revenue Service. Revenue Ruling 2023-14 If rewards are locked, tax is deferred until the lockup ends. When you later sell those rewards, any gain above the value already reported as income is a capital gain.
Starting with the 2025 tax year, brokers must report digital asset transactions to the IRS on Form 1099-DA, with 2026 forms already published.17Internal Revenue Service. About Form 1099-DA, Digital Asset Proceeds From Broker Transactions If you use a centralized exchange, expect the form. If you stake through a decentralized protocol or hold your own keys, the reporting burden falls on you.