Consensys’ legal battle against the United States Securities and Exchange Commission has unveiled new revelations about the SEC’s position on Ether (ETH). According to a report by Fox Business producer Eleanor Terret, the SEC, led by Chair Gary Gensler, had considered Ether to be a security for a certain period of time. Terret cited court documents filed by Consensys on April 29, stating that the SEC and Gensler “seem to have believed for at least a year” that Ether was an “unregistered security trading in violation of current federal regulations.”
The recent information emerged after Consensys filed an unredacted complaint against the SEC in a Texas federal court on April 25. This filing was in response to a Wells notice from the securities regulator, which outlined its intention to sue Consensys for non-compliance with federal securities laws.
According to the new filing, on March 28, 2023, the head of the SEC’s Division of Enforcement, Gurbir Grewal, authorized a formal order of investigation into Ether’s status as a security. Known as the “Ethereum 2.0” investigation, this allowed the enforcement staff to investigate and subpoena individuals and entities involved in the buying and selling of the cryptocurrency.
Terret, referring to anonymous sources familiar with the matter, revealed that the SEC instructed subpoena recipients to keep the investigation confidential if they wanted more information about it.
The “Ethereum 2.0” investigation was reportedly initiated because the SEC believed that unregistered offerings and sales of Ether had taken place since at least 2018.
If the Gensler-led SEC determines that Ether is a security, it would contradict the previous guidance given by former Chair Jay Clayton. In a speech in June 2018, the SEC’s then-Director of Corporation Finance, Bill Hinman, stated that Ether, along with Bitcoin (BTC), was not considered a security.
The newly disclosed filings revealed that the five-member commission approved the Division of Enforcement’s “Ethereum 2.0” investigation on April 13, 2023, just five days before Gensler appeared before the House Financial Services Committee and refused to clarify whether Ether was a security.
This news follows recent claims by applicants and firms involved in a potential spot Ether exchange-traded fund in the U.S., who stated that the SEC is likely to delay its decision on whether to approve such a product in May.
Bloomberg ETF analyst Eric Balchunas believes that Gensler’s position on Ether could impact the decision-making process, as he had previously refused to clarify whether Ether was a security.