Regulatory uncertainty in the crypto world is heating up, and the latest controversy has thrown Ethereum (ETH) into the spotlight. A recent letter from Republican lawmakers to SEC Chair Gary Gensler and FINRA CEO Robert Cook raises questions about Prometheum Capital’s custody services for ETH. The twist? While the SEC previously suggested that ETH isn’t a security, Prometheum has classified it as one, causing a storm of confusion. Is this a regulatory failure—or something bigger? Trump on the other hand plans to bring pro-crypto leaders into power at the SEC and CFTC.
Prometheum’s ETH Custody: Bold Move or Regulatory Mess?
In May 2024, Prometheum launched custody services for ETH, calling it a “crypto asset security.” This bold claim directly clashes with the SEC’s approval of Ethereum ETFs, which treated ETH as not a security. Lawmakers argue this contradiction is a symptom of deeper regulatory gaps.
Adding to the confusion, Prometheum’s ability to offer these services seems to exploit unclear SEC guidelines for Special Purpose Broker-Dealers (SPBDs). According to the rules, SPBDs can only handle securities. By publicly declaring ETH a security, Prometheum effectively muddied the waters. Critics say this risks stifling innovation and leaving investors unsure about how to navigate the market.
Republicans Take Aim: Who’s Behind the Push?
The letter, led by Representative John Rose and co-signed by GOP lawmakers like French Hill, Mike Flood, Dusty Johnson, and William Timmons, doesn’t hold back. It accuses Gensler’s leadership of creating “chaos and confusion” in the digital assets space. As John Rose bluntly put it, “Players in the digital assets space deserve certainty.”
Adding to the drama, journalist Eleanor Terrett shared insights about leadership changes at the SEC. Charles Gasparino has reported that Dan Gallagher, one of the names floated as a potential replacement for Gensler under Trump rule, has privately indicated he’s unlikely to take the role, though this could change depending on political shifts. Another name in the mix is Matthew Stebbins, said to have close ties to former SEC Chair Jay Clayton. Rumors suggest Clayton has been lobbying for Stebbins’ nomination.
Meanwhile, speculation about Gensler’s future is growing. Some believe he might resign by January 2025, frustrated with mounting criticism. If he steps down, names like Dan Gallagher, Brad Bondi, and Paul Atkins—known for their pro-crypto leanings—are being floated as potential successors. Trump will have the inauguration on January 20, 2025 and Gary is likely to step down near this date.
What to Expect
This letter is more than just a call for answers—it’s part of a broader push to shift crypto regulation in a more pro-innovation direction. There’s even talk of moving oversight from the SEC to the CFTC, a move backed by the Trump administration. Such a shift could mean clearer rules for projects like Ethereum, but it would require significant funding and political will to happen.
For now, the market waits. Prometheum’s actions have raised urgent questions, and Ethereum’s regulatory status remains unclear. Whether Gensler stays or goes, one thing is certain: the crypto world is hungry for clarity, and the stakes couldn’t be higher.
