The SEC approved Ether futures ETFs in October 2023 despite its ongoing investigation into whether ETH comprises a security.<\/p>\n
Newly published court filings from Consensys\u2019s legal challenge against the U.S. Securities and Exchange Commission appear to undermine the SEC\u2019s bid to classify Ether as a security.<\/p>\n
An unredacted version of Consensys\u2019s\u00a0complaint<\/a>\u00a0against the SEC published on April 29 reveals that Gurbir Grewal, the head of the SEC\u2019s Division of Enforcement, approved a formal order of investigation into whether Ethereum comprises a security on March 28, 2023.<\/p>\n The \u201cEthereum 2.0\u201d investigation was approved by a five-member SEC commission on April 13, 2023, authorizing SEC staff to subpoena entities involved in the ETH trading, including Consensys, the company behind the popular MetaMask Ethereum wallet.<\/p>\n However, the SEC then greenlit nine Ether futures exchange-traded funds (ETFs) on an accelerated basis \u2014 requiring that the regulator consider the \u201cpublic interest and the protection of investors. As such, web3 advocates believe the SEC\u2019s decision to approve the ETFs after several months of investigating Ether\u2019s potential status as a security precludes the regulator from now claiming that ETH is\u00a0in fact\u00a0a security.<\/p>\n \u201c[The SEC] internally claimed to be reviewing ETH as a security prior to the approval date,\u201d\u00a0tweeted<\/a>\u00a0Adam Cochran<\/a>, an investor at Cinneamhain Ventures. \u201cThat means: ETH is a commodity, Gensler knows this and still goes after it for political gain,\u00a0or,\u00a0the SEC is so poorly run they accelerated ETFs for an unregistered [Security Futures Product] on an unregistered security while investigating it.\u201d<\/p>\n Tom Emmer, a Congressman and House Majority Whip, also criticized Gary Gensler, the chairman of the SEC, for refusing to state whether Ether comprises\u00a0a security\u00a0during a congressional hearing roughly one week after the Ethereum 2.0 investigation\u00a0was launched.<\/p>\n \u201cNewly released court documents show that the SEC\u2019s enforcement team was directed, just weeks before Gensler\u2019s congressional testimony, to proceed as though ETH is a security,\u201d Emmer\u00a0said<\/a>. \u201cThis regulatory dishonesty is reprehensible \u2013 it\u2019s tainting our great capital markets, harming investors, and threatening U.S. global leadership.\u201d<\/p>\n Consensys\u00a0sued<\/a>\u00a0the SEC last week\u00a0in a bid\u00a0to obtain a court ruling that Ether does not comprise a security. The move followed the SEC sending Consensys a Wells Notice \u2014 which precedes a formal complaint \u2014 on April 10.<\/p>\n The legal battle seeks to bring the SEC\u2019s crusade against Ethereum under Gensler to an end, with Gensler\u00a0arguing<\/a>\u00a0that tokens issued by Proof of Stake blockchains comprise securities in recent years. However, Gensler\u2019s assertion concerning Ether contradicts the SEC\u2019s previous stance\u00a0regarding Ether.<\/p>\n In June 2018, Jay Clayton, the then-chairman of the SEC, said that Ethereum and Bitcoin were \u201csufficiently decentralized\u201d and thus do not comprise securities. In 2019, the Commodity Futures Trading Commission\u00a0followed up by stating\u00a0that Ether is a commodity and falls under its regulatory jurisdiction.<\/p>\n In its lawsuit, Consensys noted that its business was built against the backdrop of those regulatory pronouncements.<\/p>\nSEC vs Ethereum<\/h2>\n
Unusual Secrecy<\/h2>\n