A United States appeals court has upheld a decision made by a California federal judge to dismiss a preemptive lawsuit filed by a cryptocurrency law firm against the Securities and Exchange Commission (SEC). The case concerned Hodl Law’s request for clarification regarding the classification of Ether, particularly in light of the regulator’s recent enforcement actions involving various cryptocurrencies.
The Ninth Circuit appeals court reviewed Hodl Law’s complaint, which was filed in November 2022, and concluded that the firm did not establish a credible risk of facing enforcement action from the SEC for allegedly violating securities laws simply due to its involvement with the Ethereum blockchain and its token, Ether (ETH). The judicial panel highlighted that the lawsuit lacked any claims that the SEC had threatened to investigate or prosecute Hodl Law over its use of Ether.
The firm aimed to use the lawsuit as leverage to compel the SEC to provide definitive guidance on its stance regarding whether it considers ETH a security. The panel referred to the absence of evidence demonstrating an official determination by the SEC that ETH falls under the category of securities. They noted that Hodl Law had not presented any legal basis requiring the SEC to engage in specific rulemaking or provide responses to inquiries concerning ETH’s regulatory status.
Despite the ruling, Hodl Law’s senior managing partner expressed disappointment but acknowledged the outcome was anticipated. He indicated that the firm intends to pursue other potential opportunities to press the SEC for a clearer answer on the classification of Ether. The SEC has yet to officially categorize ETH or Ethereum assets as securities, even as it approved spot Ethereum exchange-traded funds earlier this year. The appeals court suggested that a decision from the SEC regarding Ether’s status might not occur in the foreseeable future.
