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“The stakes aren’t just high for Prometheum and the rest of the industry, but also for the government agency that has claimed for years that there’s a proper way for crypto firms to ‘come in and register’ to do business in the U.S.; Prometheum came in and registered but what happens next is unclear. And while it tests these murky waters, it may also help establish whether the SEC intends to view ETH as a security.”
Prometheum is able to offer both custody and trading in those digital assets because, unusually, it has licenses to do both. That means it can “legally sling Ethereum as a security,” in the words of Fortune’s Jeff John Roberts and hope that “regulators have no choice but to recognize the designation.” In this scenario, Prometheum would then be the only platform for legally trading ether, the security — a pretty nice natural monopoly if you can get it.
The question, then, is whether the SEC, witnessing this anomaly, would step in to finally designate ether a security, or not. Mike Selig, a fintech lawyer at Willkie Farr & Gallagher, says that’s unlikely, given the SEC’s preference the last few years for not saying anything very definite when it comes to crypto. “The SEC is likely to remain neutral on Ethereum,” he says. They have done no favors for ether. I wouldn’t expect it makes one now.” Under the terms of the SEC’s special-purpose broker-dealer, Prometheum has broad latitude to designate assets as securities to list on its platform (for instance, by showing that an asset meets the all-important Howey Test).