Consensys sued the SEC in pursuit of a court ruling establishing that Ether is a commodity asset and not a security in April.<\/p>\n
The U.S. Securities and Exchange Commission (SEC) has reportedly ceased efforts to classify Ether as a security asset.<\/p>\n
On June 18, Consensys, the blockchain software development company that recently launched a lawsuit against the SEC over the regulator\u2019s efforts to treat ETH as a security, tweeted that the SEC said it is ending its investigation into Ethereum.<\/p>\n
\u201cThe Enforcement Division of the SEC has notified us that it is closing its investigation into Ethereum 2.0,\u201d Consensys posted on X. \u201cThis means that the SEC will not bring charges alleging that sales of ETH are securities transactions.<\/p>\n
Ethereum 2.0 was a previously popular term used to describe Proof of Stake (PoS) Ethereum in the lead-up to the network\u2019s PoS transition.<\/p>\n
The news comprises a significant win in the saga of the SEC\u2019s campaign of aggression targeting the crypto industry in recent years, during which the regulator has frequently placed Ethereum in its crosshairs.<\/p>\n
Consensys sued<\/a> the SEC on April 25, seeking a court order ruling that the SEC does not hold regulatory jurisdiction over Ethereum and that Ether does not comprise a security asset. In June 2018, William Hinman, the then director of the SEC\u2019s Division of Corporate Finance, declared<\/a> that both Bitcoin and Ethereum were \u201csufficiently decentralized\u201d to be deemed commodities and not securities.<\/p>\n Consensys\u2019 lawsuit revealed that the SEC had launched an investigation<\/a> into whether Ether is a security asset in March 2023, with the SEC reportedly conducting the investigation with unusual secrecy. Gensler also sought to argue<\/a> that all Proof of Stake assets comprise securities that same month.<\/p>\n Against this backdrop, analysts had little hope<\/a> that the SEC would approve spot Ether exchange-traded fund (ETF) applicants as the deadline for the regulator\u2019s verdict loomed, despite the Commodity Futures Trading Commission (CFTC) regulating Ether futures<\/a> products as derivatives tracking commodity assets.<\/p>\n However, the SEC abruptly changed its tone and greenlit<\/a> the spot funds\u2019 initial 19b-4 filings in May, and is expected to give final approval to the ETFs\u2019 S-1 registration statements<\/a> by fall. Consensys said it asked the SEC if it would drop its investigation into ETH after the regulator abruptly approved the spot Ether ETFs.<\/p>\n \u201cThe decision follows a letter we sent on June 7, asking the SEC to confirm that the May ETH ETF approvals, which were premised on ETH being a commodity, meant the agency would close its Ethereum 2.0 investigation,\u201d Consensys said.<\/p>\n The lawsuit followed Consensys receiving a Wells Notice from the SEC on April 10, signaling that the regulator had completed an investigation into the company.<\/p>\n The SEC has faced consistent backlash for waging a campaign of regulation-by-enforcement targeting the web3 sector, rather than adhering to its formal rulemaking process<\/a>, since Gary Gensler\u2019s appointment as SEC chair in 2021.<\/p>\n This culminated in Coinbase<\/a>, the top U.S.-based centralized exchange, filing legal action against the SEC seeking to compel the regulator to abide by its formal rulemaking process in April 2023. The SEC is mandated to solicit public feedback on proposed rules, as opposed to the SEC\u2019s historic record of bringing retroactive enforcement actions<\/a> against crypto firms while refusing<\/a> to provide clarity regarding the regulatory obligations of web3 firms.<\/p>\nRegulation by enforcement<\/h2>\n