- The SEC has reversed its Ethereum investigation.
- The community has rejected the Howey test.
The U.S. Securities and Exchange Commission is reportedly “closing” its investigation Ethereum [ETH] 2.0 and ConsenSys, the company behind the Meta Mask wallet.
In response to the update, ConsenSys stated that it ‘survived SEC‘ and marked a win for ETH developers.
‘Ethereum survives the SEC. Today we are pleased to announce a major victory for Ethereum developers, technology providers, and industry participants: the SEC’s Enforcement Division has informed us that it is closing its investigation into Ethereum 2.0.”
Ethereum 2.0 refers to the post-Merge era, when the network changed from PoW (proof of work) to PoS (Proof of Stake). To clarify the update’s impact on ETH sold post-merger, the company added:
“This means that the SEC will not bring charges because the sales of ETH are securities transactions.”
SEC – Ethereum battle and community reactions
In April, Consensys sued the SEC over a “unlawful power grab”, accusing the SEC of going after it and its developers and classifying ETH as “security”.
However, much has changed since the lawsuit, with an easing of the war on crypto and partial approval of spot ETH ETFs.
So the SEC’s decision to withdraw from the investigation wasn’t much of a surprise. Part of SEC’s statement on the move read,
“We do not intend to recommend any Commission enforcement action against your client, Consensys Software Inc., regarding this investigation.”
For his part, Alexander Grieve, government affairs officer at Paradigm, suggested that the SEC’s letter “unusual“ and “quite evasive” regarding notice.
However, the update brought up the Howey test debate again. The SEC generally uses the test to determine whether an investment product is a security.
Commenting on the SEC-Ethereum update, Paul Grewal, Chief Legal Officer at Coinbase, said: commented,
“Good. It was a foolish liability theory to begin with… How do you explain both this decision and the other projects vilified by the SEC’s flawed Howey analysis?”
Another analyst and technology investor, Fred Krueger, called the Howey test “a joke“ and suggested the decision was political.
ETH price action
Apparently, the update appears to have turned previous headwinds into tailwinds for major ETH investors.
A whale a few hours after the update scooped $19.7 million worth of ETH up. At the time of writing, ETH was up +3% over the past 24 hours and was trading at $3.5K.
Moreover, Open Interest (OI) rates rose 4%, which indicated a substantial influx of liquidity into the derivatives market and could give the bulls an edge.