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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 law firm’s 2022 lawsuit aimed to compel the SEC to clarify whether Ether (ETH), the cryptocurrency associated with the Ethereum blockchain, should be classified as a security.
The Ninth Circuit appeals court panel ruled on August 22, 2024, that Hodl Law’s lawsuit did not demonstrate a "realistic danger" of facing enforcement action by the SEC for using Ethereum (ETH). The court found that the complaint lacked evidence that the SEC had investigated, prosecuted, or threatened any action against Hodl Law for its use of Ether.
Hodl Law’s lawsuit, initially filed in November 2022 in a San Diego district court, sought to obtain a definitive answer from the SEC regarding the regulatory status of ETH. The firm argued that without this clarification, it risked being in violation of securities laws due to its use of Ether in legal transactions.
The appeals court concurred with the lower court's decision, which was made in July 2023, and concluded that Hodl Law had failed to demonstrate that the SEC had taken "final agency action" on whether ETH constitutes a security. The panel noted that the SEC had not made any formal determination or engaged in specific rulemaking concerning the classification of ETH.
Hodl Law’s senior managing partner, Fred Rispoli, expressed disappointment with the court's ruling but indicated that the firm would continue to seek clarification from the SEC. He criticized the decision, stating that it did not align with the principles of the rule of law in the United States.
Despite the ruling, the SEC has yet to make a definitive determination on the status of Ether as a security. The commission has, however, approved spot ETH exchange-traded funds (ETFs) in July, which does not necessarily clarify the broader regulatory stance on Ethereum and its associated assets.
The Ninth Circuit panel acknowledged that the SEC might never formally decide whether Ether is a security under the Securities Act.
