The highly anticipated "Merge" in the Ethereum (ETH) ecosystem gave momentum to the ETH price last week, but according to some experts, the update may have negative regulatory effects on ETH.

As Ethereum plans to switch to the PoS system in September, it has become the focus of institutional investors. A major reduction in energy consumption and a strengthening of the deflationary structure will make Ethereum an even more attractive project.

However, things could take a turn for the worse if anti-crypto financial regulators, especially in the US, decide that Ethereum is no longer considered a security. Adam Levitin, a law professor at Georgetown University in Washington DC, claimed that ETH could be classified as a security.

   "Something no one is talking about: after the Merge, there's will be a strong case that Ether will be a security. The token in any proof of stake system is likely to be a security."

Gary Gensler, head of the Securities and Exchange Commission (SEC), is pursuing a sanctions-focused policy while increasing his agency's control over the cryptocurrency market. If the SEC is successful, most of the tokens can be considered securities and regulated in the same way as stocks.

According to Levitin, any token in a PoS network is likely to be considered a security. A security, defined by the Howey Test used in a Supreme Court decision in 1946, refers to an "investment contract" in which profits are expected. According to the Howey Test, an investment contract exists when there is "money invested in a joint business with reasonable expectation of profits from the efforts of others." In the case of Ethereum, some risks may arise after switching to proof-of-stake. In June, Gary Gensler told CNBC that the only crypto asset he doesn't consider a security is Bitcoin.