Crypto law firm loses appeal to force SEC’s hand on Ether classification.

The US Court of Appeals has upheld a decision by a California federal judge in a crypto-focused law firm's pre-emptive lawsuit against the Securities and Exchange Commission – an attempt to force the regulator to clarify its classification of Ether.

Hoddle's Law In a November 2022 complaint against the regulator in San Diego District Court, the Ninth Circuit failed to demonstrate a “substantial risk” of SEC enforcement action for violating securities laws because it used the Ethereum blockchain and its token, Ether (ETH). The Court of Appeal said on August 22.

The three-judge panel wrote that “Hoddle's complaint does not contain allegations that the SEC investigated, prosecuted, or threatened to investigate or prosecute the law firm's use of Ether or Ethereum.”

The company had hoped the SEC would force it to clarify its position on whether it considers ETH a security after it launched enforcement actions against crypto companies, a move that marks dozens of cryptocurrencies under securities laws.

“If the SEC determines that transactions involving Ether or the Ethereum network violate the Securities Act, Hoddle Law will already be in violation of the law because it is currently engaged in such transactions as part of its legal practice,” the panel wrote.

The judges upheld the California court's July 2023 dismissal of the case, saying Hoddle Law found no evidence that the SEC had engaged in “ultimate agency action” — meaning the regulator had determined that ETH was a security.

The panel added that the law firm was not aware of “any authority requiring the SEC to engage in specific rulemaking or to respond to requests for guidance from private entities” on ETH's legal classification.

Fred Rispoli, a senior managing partner at Hoddle Law, wrote in the August 22 X Post that the court's decision was “disappointing but expected.”

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“What we wanted was for the court to give us an opportunity to argue. [ETH] It is not federal security,” he said.

The SEC has not ruled that ETH and assets on the Ethereum blockchain are securities, even after approving ETH exchange-traded funds (ETFs) in July.

The Ninth Circuit panel ruled that the SEC “will never determine whether Ether or Ethereum are ‘securities' under the Securities Act.”

“That's not how the rule of law works in the United States of America,” Rispoli said, striking back at the group.

“We have some more ways to try to force the SEC to answer for us,” Rispoli said. “We will not give up.”

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