Gensler Lied to Congress About Ethereum, Says Rep. McHenry

Chairman of the House Financial Services Committee Patrick McHenry (R-NC) waded into the escalating feud between financial regulators and the crypto industry on Tuesday, accusing SEC Chair Gary Gensler of having “misled Congress” regarding the agency’s stance on Ethereum. 

McHenry’s comments come following the revelation that the SEC has internally considered Ethereum (ETH) to be an unregistered security for over a year, according to unredacted portions of a lawsuit filed against the regulator by Ethereum software company Consensys.

In the intervening period, Gensler has repeatedly refused to comment about the SEC’s position on Ethereum, which is second only to Bitcoin among crypto assets by market capitalization. During a contentious round of questioning from McHenry on the subject during a congressional hearing on April 18 last year, Gensler evaded direct questions about whether the SEC considers ETH to be a security. 

According to Consensys’s lawsuit filed last week against the regulator, the SEC had only five days earlier, on April 13, approved a formal order authorizing agency staff to issue subpoenas related to the offer and sale of numerous crypto assets, including ETH. (Disclosure: Consensys is one of 22 investors in Decrypt.)

“New evidence shows Chair Gensler himself misled Congress,” McHenry said of Gensler’s testimony last year in a statement released today. “New court filings show this was an intentional attempt to misrepresent the Commission’s position.” 

It’s worth noting, however, that a formal order from the SEC, like the kind referenced in the Consensys lawsuit, isn’t meant to represent a legal conclusion and is often just one of the first steps in an investigation, according to a source familiar with the mater.

McHenry in his statement today went on to deride the apparent disconnect between the SEC’s public words and private actions on ETH as an example of the “arbitrary and capricious nature of the agency’s regulation by enforcement approach to digital assets.” 

Shortly after issuing the strongly worded statement, McHenry’s office announced a hearing, set for next week, on the Financial Services Committee’s Subcommittee on Capital Markets, titled “SEC Enforcement: Balancing Deterrence with Due Process.”

Decrypt reached out to McHenry’s office regarding the purpose of the hearing but did not immediately receive a response.