According to Cointelegraph, a United States appeals court has upheld a California federal judge’s decision to dismiss a lawsuit filed by Hodl Law against the Securities and Exchange Commission (SEC). The lawsuit aimed to compel the SEC to clarify its stance on whether Ether (ETH) is classified as a security.
Hodl Law's complaint, filed in November 2022 in a San Diego district court, argued that the firm faced a potential risk of SEC enforcement action for using the Ethereum blockchain and its token, Ether. However, the Ninth Circuit appeals court panel ruled on August 22 that the complaint did not demonstrate a “realistic danger” of such enforcement action. The panel noted that there were no allegations indicating that the SEC had investigated, prosecuted, or threatened to investigate or prosecute the law firm’s use of Ether or Ethereum.
The law firm had hoped the lawsuit would force the SEC to clarify its position on Ether, especially after the regulator launched several enforcement actions against crypto firms, implicating numerous cryptocurrencies under securities laws. The panel, however, supported the California court’s July 2023 dismissal of the case, stating that Hodl Law failed to provide evidence that the SEC had engaged in “final agency action” regarding the classification of Ether as a security.
The panel further added that Hodl Law had not identified any authority requiring the SEC to engage in specific rulemaking or respond to private parties’ requests for guidance on Ether’s legal classification. Hodl Law’s senior managing partner, Fred Rispoli, expressed disappointment in an August 22 post, stating that the court’s decision was “disappointing but expected.” He emphasized that the firm merely wanted an opportunity to argue that Ether is not a federal security.
The SEC has not yet determined whether Ether and assets on the Ethereum blockchain are securities, despite approving spot Ether exchange-traded funds (ETFs) in July. The Ninth Circuit panel mentioned that it is possible the SEC “will never decide that Ether or Ethereum is a ‘security’ under the Securities Act.” Rispoli criticized the panel’s decision, arguing that it undermines the rule of law in the United States. He also indicated that the firm would explore other avenues to compel the SEC to provide a definitive answer on the matter, stating, “We are not giving up.”
