The U.S. Securities and Exchange Commission (SEC) has internally considered Ethereum to be a security for over a year, according to previously redacted portions of a lawsuit filed by software giant Consensys against the SEC that were revealed this morning.
Per Consensys’ complaint, Gurbir Grewal, the Commission’s Director of the Division of Enforcement, issued an internal Formal Order on March 28, 2023, announcing an investigation into “Ethereum 2.0,” authorizing employees of the regulator to investigate and subpoena parties involved in the buying and selling of ETH.
The order, which Consensys says was approved by the Commission on April 13, 2023, explicitly refers to Ethereum as a security in and of itself, as it authorizes the investigation 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.”
The revelation that the SEC has officially considered ETH to be a security for over a year is a remarkable one. SEC Chair Gary Gensler has repeatedly deferred when asked explicitly regarding the agency’s stance on the matter. As recently as last month, Gensler refused to state the SEC’s position when it comes to ETH.
Is Ethereum a Security? SEC Chair Gary Gensler Defers on the Question
The chair of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, refused to be drawn on whether the regulator considers Ethereum to be a security—even as the SEC considers multiple applications for spot Ethereum ETFs. Speaking on Bloomberg TV, Gensler said he would "defer on that question," when pressed on whether the regulator viewed Ethereum as a security. "On any one of these crypto tokens, it's about the facts and circumstances as to whether the investing public is anticipating...
An SEC spokesperson told Decrypt that the regulator declines to comment on the matter.
Ethereum, which had already been sagging with the rest of the market on Monday, was trading for $3,143.69 at the time of writing—marking a 5% slip from this time yesterday, but only 1.5% lower than this time last week, according to CoinGecko data.
For years, the crypto industry has held out hope that Ethereum—the second largest cryptocurrency in the world after Bitcoin, and the foundation of the massive Ethereum ecosystem—might be considered a commodity in the American government’s eyes, paving the way for ETH’s integration into the American economy on a trajectory similar to Bitcoin.
CFTC Chair Says Ethereum Is a Commodity—Despite Gensler’s ‘Bitcoin Only’ Position
The chairman of the Commodities and Futures Trading Commission (CFTC) has taken a firm stance against the Security and Exchange Commission (SEC)’s subtle power creep over the digital asset market. Rostin Behnam told the Senate Agriculture Committee on Wednesday that Ethereum, the second-largest cryptocurrency next to Bitcoin, is a commodity. “It’s been listed on CFTC exchanges for quite some time, and for that reason,” said Behnam, who argued that it creates a “direct jurisdictional hook” for t...
The head of the Commodity Futures Trading Commission (CFTC) has explicitly declared Ethereum to be a commodity in the past.
It would appear that the SEC’s scrutiny of Ethereum escalated after the blockchain’s September 2022 merge event, which transitioned it to an energy-efficient proof of stake consensus mechanism. That new structure now allows users to stake ETH with the network to help it function—and accrue rewards in the process—a financial incentive the SEC clearly takes issue with.
Consensys Sues SEC Over Attempts to Regulate Ethereum as a Security
Ethereum software giant Consensys filed suit against the Securities and Exchange Commission (SEC) on Thursday, alleging that the regulator is trying to "seize control over the future of cryptocurrency"—and that the agency plans to designate Ethereum as a security. Consensys, the Ethereum startup behind the popular MetaMask wallet and Infura infrastructure platform, alleges that the SEC is overreaching in its apparent attempts to regulate Ethereum under current chair Gary Gensler. An agency offic...
In the year following the SEC’s reported internal Formal Order regarding Ethereum, the agency has steadily ratcheted up its offensive against entities involved with the cryptocurrency. In February, the Ethereum Foundation, the Swiss non-profit that supports the Ethereum ecosystem, was subpoenaed by an unnamed “state authority.” Several American crypto companies have received subpoenas related to their dealings with the Ethereum Foundation.
And last week, Consensys, perhaps the largest Ethereum-focused American company, filed a preemptive lawsuit against the SEC, arguing that it does not have the grounds to regulate Ethereum, as the asset should not be classified as a security.
Editor's note: This story was updated to reflect the SEC's decision not to comment on the unredacted lawsuit and to clarify the process of ETH staking.
Edited by Stacy Elliott.
