Key Points
New details have emerged regarding the U.S. Securities and Exchange Commission’s (SEC) views on Ethereum (ETH) as a result of Consensys’ ongoing lawsuit against the regulator.
According to a Fox Business report by Eleanor Terret, the SEC and its chairman Gary Gensler have believed for some time that Ether could be classified as a security.
SEC’s Position on Ether
Terret’s report cites court documents filed by Ethereum software company Consensys on April 29, which suggest that the SEC and Gensler may have held this view for at least a year.
This belief implies that Ether was an unregistered security trading in violation of current federal regulations.
This information has come to light just days after Consensys filed an unredacted complaint against the SEC in a Texas federal court on April 25.
The complaint was in response to a Wells notice from the SEC outlining plans to sue Consensys for non-compliance with federal securities laws.
The recent filing reveals that on March 28, 2023, Gurbir Grewal, the head of the SEC’s Division of Enforcement, approved a formal investigation order into Ether’s status as a security.
This investigation, dubbed “Ethereum 2.0,” authorized enforcement staff to probe and subpoena individuals and entities involved in the cryptocurrency’s trading.
Terret, citing anonymous sources, mentioned that the SEC instructed subpoena recipients to maintain strict confidentiality about the investigation if they wished to learn more about it.
The “Ethereum 2.0” investigation was reportedly based on the SEC’s belief that potential unregistered offerings and sales of Ether had taken place since at least 2018.
If the Gensler-led SEC determines Ether to be a security, this would contradict previous SEC guidance under Chairman Jay Clayton.
In June 2018, then-Director of Corporation Finance Bill Hinman stated in a speech that the SEC did not consider Ether, or Bitcoin (BTC), to be securities.
The recent filings disclose that the five-member Commission approved the Division of Enforcement’s “Ethereum 2.0” investigation on April 13, 2023.
This was just five days before Gensler appeared before the House Financial Services Committee, where he declined to answer repeated questions about whether the SEC considered Ether to be a security.
This development follows claims by applicants and firms involved in a potential spot Ether exchange-traded fund in the U.S. that the SEC is likely to postpone its decision on approving such a product in May.
Bloomberg ETF analyst Eric Balchunas believes that Gensler’s stance on Ether could impact the decision process, as Gensler has refrained from providing clarity on whether Ether was a security last year.
