The Gary Gensler-led Securities and Exchange Commission (SEC) began investigating Ethereum’s security posture last year, according to an April 29 lawsuit by Consensys.
The filing revealed that Gurbir Grewal, the director of the Enforcement Division, had approved the formal investigative order regarding ‘Ethereum 2.0’ in March 2023. This formal order granted SEC personnel broader authority to investigate and subpoena individuals and entities involved in ETH transactions. .
It added:
“The formal decision bases this delegation on the SEC’s information demonstrating possible offers and sales, since at least 2018, of ‘certain securities, including but not limited to ETH, for which no registration statement was or is in effect. . . and for which no exemption existed or exists.’”
Subsequently, the SEC issued subpoenas to numerous individuals and entities with investments in Ethereum, including Consensys.
Notably, this revelation emerged a few days after Consensys filed a legal action against the SEC on April 25. The company claimed that the SEC’s attempt to classify Ethereum as a security instrument represented a regulatory overstep, warning that such a designation could stifle innovation and negatively impact developers. , investors and entities using Ethereum’s decentralized infrastructure.
Ethereum’s regulatory status
Ethereum’s regulatory status has been a persistent issue for the SEC in recent years.
In 2018, Gensler stated during a lecture at the Massachusetts Institute of Technology that ETH is not considered a security.
However, Gensler’s position appears to have changed, especially after Ethereum’s transition to proof of stake. Nevertheless, he has refrained from making a definitive comment on ETH’s status, despite numerous questions from stakeholders, including members of Congress.
Although Gensler remains silent on the matter, proponents in the crypto community have cited comments from former SEC officials such as Bill Hinman, as well as legal documents from financial regulators such as the Commodities Futures Trading Commission, to argue that Ethereum does not meet the criteria for classification as a security.