SEC And Gary Gensler Believed Ether Was A Security For At Least A Year, New Court Docs Reveal

The United States Securities and Exchange Commission (SEC) and its Chair Gary Gensler appear to have believed Ether (ETH) was a security for at least a year-long period, according to Monday findings.According to a complaint made by Consensys Software Inc., the SEC Director of Enforcement Gurbir Grewal launched an investigation into “Ethereum 2.0” on March 28, 2023, over “possible offers and sales, since at least 2018, 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.”

SEC And Gary Gensler Thought ETH Was A Security

The filing seemingly contradicts the federal agency’s prior stance on ETH, which included approving ETH Future ETFs in October 2023.

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Some folks are confused, as to why the SEC "Eth is a security timeline" and the "Futures ETF" is bad for the SEC.

Here's a quick breakdown of why it paints Gensler into a corner:

— Adam Cochran (adamscochran.eth) (@adamscochran) April 29, 2024

Gensler, who has previously stayed quiet over ETH’s classification status, has long faced scrutiny for the agency’s regulation-by-enforcement approach.

Most notably, in June 2028, the SEC’s then-Director of Corporation Finance, Bill Hinman, gave an infamous speech alleging that ETH was not a security.

“The SEC staff has communicated to Consensys that the agency is investigating whether Consensys’ current offers and sales of ETH — transactions carried out from its own holdings as part of its normal treasury operations — are securities transactions,” the filing read. “And the staff recently requested that Consensys make a “proffer” to the SEC to state why Consensys believes its ETH sales are not securities transactions.”

After Ethereum 2.0 Investigation, Will The SEC Take Action?

Prior to the news of Monday’s court filings, blockchain development company Consensys formally filed litigation against the commission for its attempt to regulate ETH as a security.

Today, Consensys filed a lawsuit against the Securities and Exchange Commission.

The goal behind this is to ensure that Ethereum remains a vibrant and indispensable blockchain platform and to preserve access for the countless developers, market participants, and institutions…

— Consensys (@Consensys) April 25, 2024

In a blog post by Consensys founder Joe Lubin, the Ethereum founder argued that “the SEC should not be allowed to arbitrarily expand its jurisdiction to include regulating the future of the internet” and that the federal agency’s “reckless approach is bringing chaos to developers, market participants, institutions, and nations who are building or already managing critical systems running on Ethereum.”

In recent weeks, reports emerged that numerous companies linked to the Ethereum Foundation have been subpoenaed to provide information on the Swiss non-profit.

Similarly, in March, a comment posted in the foundation’s GitHub repository showed that the organization had been contacted by an unnamed “state authority.”

Having received a Wells notice on April 10, it appears to be only a matter of time before the SEC comes after Consensys legally.