The ongoing lawsuit between Consensys and the U.S. Securities and Exchange Commission (SEC) has shed light on the SEC's evolving stance on Ethereum, as revealed in court documents filed by Consensys. According to a report by Fox Business producer Eleanor Terret, the SEC, under the leadership of Chairman Gary Gensler, has at least temporarily considered Ethereum to be a cryptocurrency falling under securities regulations.
The unredacted complaint filed by Consensys in federal court in Texas on April 25 was a response to a notice from the SEC outlining its intention to sue Consensys for alleged violations of federal securities laws. The court documents suggest that as early as March 28, 2023, the SEC's Enforcement Division Chief, Gurbir Grewal, approved a formal order to investigate Ethereum's securities status, known as the "Ethereum 2.0" investigation.
The investigation grants law enforcement officials the authority to subpoena individuals and entities involved in cryptocurrency transactions. Sources with direct knowledge of the matter revealed that recipients of these subpoenas were instructed by the SEC to maintain strict confidentiality. The investigation reportedly focuses on potential unregistered issuances and sales of ether dating back to at least 2018.
If the SEC were to classify Ethereum as a security, it would contradict previous guidance from former SEC Chairman Jay Clayton. In a speech in June 2018, Clayton's company chief financial officer, Bill Hinman, asserted that Ethereum was akin to Bitcoin and not considered a security by the SEC.
Newly uncovered documents indicate that the SEC's five-member committee cleared the "Ethereum 2.0" investigation on April 13, 2023, just days before Gensler appeared before the House Financial Services Committee. During this appearance, Gensler declined to provide clarity on whether the SEC deemed Ethereum to be a security.
Recent developments regarding a potential Ethereum spot exchange-traded fund (ETF) in the United States suggest that the SEC may delay its decision on approving such a product in May. Bloomberg ETF analyst Eric Balchunas believes that Gensler's stance on Ether could influence the decision-making process, given his prior refusal to definitively classify Ethereum as a security.
