To: rule-comments@sec.gov

Subject: Comment on File No. SR-MEMX-2025-15 - Ethereum is Not a Commodity

Securities and Exchange Commission

100 F Street, NE

Washington, DC 20549-1090

Re: Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Allow the Exchange To List and Trade Options on Ethereum Funds

Dear Commissioners,

I write to object to MEMX's characterization of Ethereum as a "commodity" and its proposal to list options on "Ethereum-backed commodity ETFs." This designation is incorrect as a matter of law and precedent.

ETHEREUM IS NOT A COMMODITY

The Bitcoin whitepaper established a clear two-pronged precedent for digital commodity status:

1. Decentralized Digital Transactions

2. Decentralized Governance

Both elements are required. Bitcoin satisfies both. Ethereum satisfies only the first.

THE BITCOIN PRECEDENT

The Bitcoin whitepaper explicitly describes both innovations:

- "A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution" (Decentralized Transactions)

- "They vote with their CPU power, expressing their acceptance of valid blocks by working on extending them and rejecting invalid blocks by refusing to work on them" (Decentralized Governance)

The whitepaper further states: "Any needed rules and incentives can be enforced with this consensus mechanism" and "Nodes work all at once with little coordination."

This established that commodity status requires BOTH decentralized transactions AND decentralized governance. The SEC approved Bitcoin ETFs because Bitcoin met both requirements. Applying different standards to Ethereum would be arbitrary and capricious under the Administrative Procedure Act.

ETHEREUM'S GOVERNANCE REMAINS CENTRALIZED

1. **The Premine**: 72 million ETH were created at genesis and distributed to founders and early investors - approximately 60% of current supply. Bitcoin had zero premine.

2. **Central Control**: The Ethereum Foundation controls protocol development. Core developers hold regular meetings where protocol decisions are made. This is antithetical to Bitcoin's model where "nodes work all at once with little coordination."

3. **Coordinated Changes**: Ethereum has undergone multiple centrally-coordinated hard forks, including reversing transactions after the DAO hack. The Proof-of-Stake transition was centrally planned and executed by the Ethereum Foundation.

4. **Not Peer-to-Peer Governance**: Ethereum nodes cannot independently choose protocol rules. They must accept Ethereum Foundation decisions or be forked off the network. This violates the peer-to-peer governance model established by Bitcoin.

THE HOWEY TEST IS BINARY

The Supreme Court's Howey Test is not a sliding scale. An asset either is or is not a security. There is no such thing as being "sufficiently decentralized." The test is binary:

- Investment of money: YES (ETH purchase/premine)

- Common enterprise: YES (Ethereum network)

- Expectation of profits: YES (explicitly marketed)

- From efforts of others: YES (Ethereum Foundation and core developers)

Former SEC officials' comments about "sufficient decentralization" have no basis in law. No federal court has ever recognized degrees of decentralization as relevant to securities analysis. Decentralization is binary - you either have it or you don't. Ethereum doesn't.

OPTIONS TRADING COMPOUNDS THE VIOLATION

Allowing options trading on Ethereum ETFs before establishing Ethereum's regulatory status:

1. Misleads investors by implying commodity status

2. Creates derivative exposure to an unregistered security

3. Multiplies systemic risk

4. Exceeds MEMX's authority to classify assets

5. Creates legal liability for MEMX if Ethereum is later properly classified as a security

FORMAL REQUEST

The Commission must:

1. **Reject this rule change** - MEMX cannot list options on "commodity ETFs" when the underlying asset is not a commodity

2. **Issue formal determination** - Classify Ethereum as a security based on its failure to meet both prongs of the Bitcoin precedent

3. **Apply consistent standards** - If Bitcoin's full decentralization makes it a commodity, Ethereum's centralized governance makes it a security

CONCLUSION

The Bitcoin whitepaper established that digital commodities require both decentralized transactions and decentralized governance. Ethereum has never achieved decentralized governance due to its premine, the Ethereum Foundation's ongoing control, and centrally-coordinated protocol changes.

The SEC cannot permit exchanges to trade derivatives on assets of undetermined status. More critically, the SEC cannot allow exchanges to incorrectly label securities as commodities. Ethereum is a security under both the Howey Test and the Bitcoin precedent.

I urge the Commission to protect investors by rejecting this proposal and formally classifying Ethereum as a security.

Respectfully submitted,

Bryan Solstin

2025 JUN 19

https://www.solstin.com/contact