SEC and Gensler Maintain View that Ether Functioned as a Security for a Minimum of One Year

Consensys, the Ethereum software firm, has recently filed a lawsuit against the United States Securities and Exchange Commission (SEC), which has shed light on the SEC’s position on Ether (ETH). According to a report by Fox Business producer Eleanor Terret, the SEC and its chairman Gary Gensler believed that Ether was an unregistered security trading in violation of federal regulations for at least a year. The new information emerged after Consensys filed an unredacted complaint against the SEC in a Texas federal court, in response to a Wells notice from the regulator. The complaint revealed that the SEC’s Division of Enforcement approved a formal order of investigation into Ether’s status as a security on March 28, 2023. This investigation, known as “Ethereum 2.0,” authorized enforcement staff to investigate and subpoena individuals and entities involved in the buying and selling of Ether. The SEC instructed subpoena recipients to keep the investigation confidential if they wanted more information. The SEC’s belief in potential unregistered offerings and sales of Ether since 2018 formed the basis of the “Ethereum 2.0” investigation. If Gensler’s SEC determines that Ether is a security, it would contradict previous SEC guidance under Chairman Jay Clayton, who stated in 2018 that Ether, along with Bitcoin, was not a security. The new filings also revealed that the Commission approved the Division of Enforcement’s investigation on April 13, 2023, just five days before Gensler appeared before the House Financial Services Committee and declined to answer questions about Ether’s security classification. This news comes amidst speculation that the SEC may delay its decision on approving a spot Ether exchange-traded fund in May. Bloomberg ETF analyst Eric Balchunas believes that Gensler’s stance on Ether could influence the decision-making process, as he has previously avoided clarifying whether Ether was considered a security.