The Securities and Exchange Commission (SEC), led by Chairman Gary Gensler, has been operating under the belief that Ethereum (ETH), the second-largest crypto, is an unregistered security. This perspective has been held for at least a year, FOX Business reported on Monday, citing recent court filings.The filings emerged from a lawsuit filed by Ethereum software company Consensys last week, which is challenging the SEC’s attempt to classify Ethereum as a security. Consensys’ legal action follows a Wells Notice from the SEC, which signaled the agency’s intention to sue the firm for not complying with federal securities laws.
According to FOX Business, the documents reveal that the SEC’s Enforcement Division, under the direction of Gurbir Grewal, initiated a formal investigation into Ethereum’s status as a security in March 2023. This investigation, referred to as the “Ethereum 2.0” investigation, aims to explore transactions and activities related to Ethereum dating back to at least 2018.Sources familiar with the matter told FOX Business that the SEC sent multiple document requests and subpoenas to firms linked to Ethereum, including Consensys. MetaMask’s parent company reportedly received four subpoenas from the SEC and a Wells Notice.The SEC’s current position appears to contradict previous guidance from 2018, when then-Director of Corporation Finance Bill Hinman stated that Ethereum was not considered a security due to its decentralized nature. This is juxtaposed with the Commodity Futures Trading Commission’s later classification of ETH as a commodity.Consensys’ legal action against the SEC aims for the court to resolve the dispute over Ethereum’s regulatory status, a case that could have wide-reaching implications for the crypto industry, akin to previous cases against major platforms like Coinbase and Kraken.
