SEC and Chair Gensler's Court Filings Indicate One-Year Belief That Ethereum Was a Security: Fox Business

Ethereum is embroiled in a brewing regulatory battle with the SEC. A recent lawsuit by Ethereum software firm Consensys sheds light on a year-long SEC investigation probing whether Ethereum is an unregistered security, Fox Business reported in an exclusive report.

This investigation marks a shift from prior SEC stances. In 2018, under Chairman Jay Clayton, Ethereum (alongside Bitcoin) enjoyed a "not-a-security" designation due to its decentralized nature. This fueled crypto industry growth, with companies like Consensys building their businesses on this foundation.

However, under Chairman Gary Gensler, the winds seem to have changed. Ethereum's September 2022 transition to a proof-of-stake system appears to have triggered a reevaluation by the SEC. Proof-of-stake, where users stake their Ethereum to secure the network and earn rewards, could resemble an investment contract under the Howey Test (a key factor in defining a security).

This internal shift is further evidenced by the "Ethereum 2.0" investigation launched in March 2023. The SEC sought information on the proof-of-stake transition, Consensys' involvement, and even Ethereum sales dating back to 2018, potentially hinting at the SEC's belief these sales might be unregistered securities offerings.

The investigation culminated in a Wells notice to Consensys in April 2024, threatening a lawsuit for acting as an unregistered broker-dealer offering unregistered securities (Ethereum) through their MetaMask wallet. This mirrors past actions against Coinbase and Ripple.

Consensys' lawsuit challenges the SEC's new stance. They seek a definitive court ruling on Ethereum's classification, aiming to bring clarity to the entire crypto industry.

Resources:

FOX Business