Expectations for improved regulatory environment increase, ETH Staking zone may become the biggest beneficiary.

Recently, with Trump's strong return to the political arena, the market has begun to discuss rumors about the possible departure of SEC Chairman Gary Gensler. This expectation has sparked discussions about the potential improvement of the cryptocurrency regulatory environment. Against this backdrop, the ETH Staking zone is likely to become a directly benefited area, where the leading project Lido is expected to break free from its current price predicament.

Review of Lido's Regulatory Predicament

Lido, as a leading project in the ETH Staking zone, helps users participate in Ethereum PoS and earn returns through non-custodial technology services, while lowering the technical and financial thresholds. The project has undergone three rounds of financing, raising a total of $170 million. Since its launch in 2022, Lido has maintained a market share of around 30% due to its first-mover advantage. As of now, data shows that Lido still holds a 27% market share, indicating that its business demand remains strong.

However, the current price slump faced by Lido is primarily due to a lawsuit that broke out at the end of 2023. At that time, an individual named Andrew Samuels filed a lawsuit against Lido DAO in the United States District Court for the Northern District of California, accusing it of selling LDO tokens to the public without registration, in violation of the Securities Act of 1933. This lawsuit involves not only Lido DAO but also its main investors.

The progress of the lawsuit has had a significant impact on the price of LDO. On April 10, 2024, the court decided to accept the case. Subsequently, the plaintiffs requested a default judgment against Lido DAO, forcing Lido DAO to hire a lawyer to respond to the lawsuit. This series of events triggered a risk-averse sentiment among investors, leading to continued pressure on the price of LDO.

The Controversy Over the Securities Nature of stETH

In addition to the aforementioned litigation, the lawsuit filed by the SEC against Consensys Software Inc. in June 2024 has also impacted Lido. The SEC accused Consensys of engaging in unregistered securities issuance and sales through its MetaMask Staking service, which involves Lido's stETH token.

The core dispute in these cases is whether stETH qualifies as a security. U.S. law typically uses the "Howey Test" to determine whether a particular transaction or instrument constitutes a security. The test includes four criteria: investment of money, common enterprise, expectation of profits, and efforts of others.

However, the cryptocurrency industry holds a different view on this. For example, a certain trading platform believes that the ETH Staking business does not meet the four elements of the Howey test and therefore should not be considered a securities transaction. They argue that users retain ownership of their assets during the staking process, there is no common enterprise, staking rewards are similar to labor income, and they do not rely on the efforts of others for management.

The future development of Lido is worth paying attention to

Considering the following points, the future development of Lido is worth close attention:

1. Current price pressure mainly comes from regulatory uncertainty, rather than poor business performance.

2. ETH has been defined as a commodity, and there is a lot of room for discussion on this topic.

3. After the approval of the ETH ETF, more resources may be invested to promote the development of related businesses.

4. The legal costs of related litigation are relatively low, and the impact is controllable.

In summary, with the expectation of an improved regulatory environment gaining traction, Lido's development prospects are worth investors' continued attention.