• CFTC maintained ETH was a commodity in a KuCoin complaint.
• KuCoin recorded massive outflows, but ETH ETF May approval remains unclear. 

The recent KuCoin lawsuit from the CFTC (Commodities Futures Tradings Commission) has renewed the debate on the odds of Ethereum [ETH] ETF approval by May. 

In the CFTC complaint, the commission reiterated that Ether, Bitcoin [BTC], and Litecoin [LTC] are commodities, as per its press release. 

“During the Relevant Period, KuCoin solicited and accepted orders, accepted property to margin, and operated a facility for the trading of futures, swaps, and leveraged, margined, or financed retail transactions involving digital assets that are commodities including Bitcoin [BTC], ether [ETH], and Litecoin [LTC].”

Is it a hidden gem or an SEC/CFTC fight?

Reacting to the development, Jake Chervinsky, chief legal officer at Variant Fund, claimed that the lawsuit is a “hidden gem.”

“Hidden gem in the CFTC’s KuCoin complaint. Usually, the SEC and CFTC pretend they aren’t in a turf war over crypto. Today, the CFTC is openly attacking the SEC’s supposed investigation of ETH.”

The US SEC (Securities and Exchange Commission) previously termed ETH as a commodity

However, it has remained unclear following Ethereum’s change from Proof-of-Work (PoW) to Proof-of-Stake (PoS) consensus. 

However, Nate Geraci of ETF Store cautioned the apparent SEC vs. CFTC duel on ETH and called for clarity for users and investors. 

“Regardless of what you think about ether, it’s sad we can’t get the government & regulators to offer clarity on it or crypto in general. Isn’t that what would benefit the general public & investors? Instead, we’re seeing veiled shots b/w agencies & inconsistencies everywhere.”

True to Geraci’s words, the complaint and ensuing lack of clarity have tipped KuCoin users and investors to move massive amounts of funds and assets off the exchange. 

Provisional data showed KuCoin suffered around $500M outflows after the complaint; 

“Approximately US$500 million in assets have been withdrawn from KuCoin on the Ethereum in the past few hours, including 274 million USDT, 15,500 ETH, 50 million ONDO, 12 million FET, 95.38 million GHX, etc. KuCoin hot wallets still hold over $3.6 billion worth of assets on the Ethereum.”

Nevertheless, the spot ETH ETF approval odds have hit a pessimistic 25%, with Bloomberg ETF analysts citing a lack of engagement during BTC ETF applications. 

However, Grayscale legal executive remained confident of approval, stating that,

“I don’t think perceived lack of engagement from regulators should be indicative of one outcome or another.”