SEC's Stance on Ether as a Security Revealed in Consensys Lawsuit
Summary:
The ongoing litigation between Consensys and the SEC has revealed further details about the commission's views on Ether (ETH) as a security. The Ethereum software company’s court filings suggested that SEC and its chairman Gary Gensler seemingly regarded Ether as an "unregistered security" for a certain period. This emerged following Consensys' response to a Wells notice from the SEC, announcing plans to sue the firm over federal securities law violations. The SEC's Division of Enforcement reportedly initiated an investigation, interestingly named "Ethereum 2.0", into Ether's status as a security and possible unregistered sales and offerings since 2018. This stance conflicts with previous SEC guidance under Jay Clayton's leadership, which didn't consider Ether as a security. Gensler has consistently avoided giving clarity on this matter.
The litigation initiated by Consensys against the U.S. Securities and Exchange Commission (SEC) has shed light on the regulator's viewpoint towards Ether (ETH). As revealed by Fox Business producer Eleanor Terret, SEC and its chairman, Gary Gensler, seem to have classified Ether as a security during some past period.
According to the details from the court filing on April 29 by the Ethereum software company, Consensys, it's suggested that the SEC along with Gensler have possibly considered Ether as an "unregistered security" that was trading inconsistent with modern federal laws, for a minimum duration of a year.
This additional detail has emerged following Consensys' submission of a fully disclosed complaint against the SEC in a Texas federal court on April 25. The filing was a response to a Wells notice from the SEC outlining the regulator's intent to take legal action against Consensys for not adhering to federal securities laws.
Per the updated filing, the SEC's Division of Enforcement chief, Gurbir Grewal, sanctioned an official investigation order into the classification of Ether as a security on March 28, 2023. Named "Ethereum 2.0", the probe empowered the enforcement personnel to examine and summon individuals and firms associated with the trade of the digital currency. Relying on unnamed insiders with firsthand knowledge, Terret pointed out that the SEC mandated subpoena recipients to maintain secrecy about the investigation if they desired further information about the inquiry.
The probe, "Ethereum 2.0", is said to be anchored on the presumption of the SEC that potential unregistered sales and offerings of Ether have occurred from 2018. If the Gensler-led SEC categorizes Ether as a security, it would cause conflict with the previous SEC guideline under the leadership of Jay Clayton. In his capacity as Director of Corporation Finance in June 2018, Bill Hinman asserted in a speech that the SEC did not consider Ether, like Bitcoin, as a security.
The recently revealed filings suggest that the SEC's five-member commission gave its nod to the Division of Enforcement's "Ethereum 2.0" probe on April 13, 2023, just five days prior to Gensler's appearance at the House Financial Services Committee. At the committee, Gensler sidestepped repeated queries about SEC's opinion of Ether being a security.
This revelation occurs shortly after contenders and businesses engaged in a prospective Ether spot exchange-traded fund in the U.S. suggested that the SEC might postpone the verdict on authorizing such a product in May. Eric Balchunas, a Bloomberg ETF analyst, suggests that Gensler's position on Ether might influence the decision-making process. He cites that Gensler has previously dodged providing clarity on the categorization of Ether as a security.
Published At
4/29/2024 5:09:29 PM
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