Ethereum Fights Back Against SEC Security Label

According to a court document filed on Monday, for over a year, the US Securities and Exchange Commission (SEC) has been looking into whether or not Ethereum could be considered a security. The document's filing party, Consensys, a blockchain and web3 software technology business, filed a lawsuit against the securities regulator last week, contesting the SEC's jurisdiction to regulate ether as a security.

According to the court document:

On March 28, 2023, Gurbir Grewal, Director of the Division of Enforcement, approved the Formal Order of Investigation in the matter of 'Ethereum 2.0' ... delegating to the SEC staff broader authority to investigate and subpoena individuals and entities involved in the buying or selling of ETH.

"The Commission affirmed the issuance of the Formal Order shortly thereafter on April 13, 2023," the filing continues. "The Formal Order predicates this delegation on the SEC's information showing possible offers and sales, since at least 2018, of 'certain securities, including, but not limited to ETH, as to which no registration statement was or is in effect ... and for which no exemption was or is available.'"

Ethereum's Security Classification Under Scrutiny

If Ethereum is categorized as a security by the current SEC under Chair Gary Gensler, it would go against earlier recommendations made by the SEC under Chairman Jay Clayton. Ethereum and Bitcoin were not regarded as securities, according to a speech made at the time by Bill Hinman, the SEC's Director of Corporation Finance.

Furthermore, the document shows that on April 13, 2023, the five-member SEC commission approved the "Ethereum 2.0" probe. This clarification came before Chair Gensler's hearing before the House Financial Services Committee, when he sidestepped multiple inquiries concerning the SEC's position on ethereum's possible security classification from Committee Chair Patrick McHenry (R-N.C.).

Except for bitcoin, Gensler has repeatedly said that the majority of cryptocurrency tokens are securities. He did not, however, explicitly address the question of whether ETH is a security. In a letter to Gensler earlier this month, 48 US congressmen questioned whether ETH qualifies as a security. Nine exchange-traded funds (ETFs) for ether futures were approved by the SEC in October. Next month, however, applications for spot Ethereum exchange-traded funds (ETFs) are anticipated to be denied by the securities watchdog.

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