SEC and Gensler believed Ether was security for at least a year

Consensys’ lawsuit against the United States Securities and Exchange Commission has uncovered more information about the SEC’s stance on Ether (ETH).

The SEC and its chair, Gary Gensler, believed Ether was a security for at least some time, according to a report by Fox Business producer Eleanor Terret.

Citing court documents filed by the Ethereum software firm Consensys on April 29, Terret wrote that the SEC and Gensler “appear to have believed for at least a year” that Ether was an “unregistered security trading out of compliance with current federal regulations.”

SEC Chair Gary Gensler in a meeting of the Financial Stability Oversight Council at the U.S. Treasury on July 28, 2023. Source: Fox Business

The new information comes a few days after Consensys filed an unredacted complaint against the SEC in a Texas federal court on April 25. The filing came in response to a Wells notice from the securities regulator detailing its plans to sue the firm for failing to comply with federal securities laws.

According to the new filing, on March 28, 2023, the head of the SEC’s Division of Enforcement, Gurbir Grewal, approved a formal order of investigation into Ether’s status as a security.

The investigation, known as the “Ethereum 2.0” investigation, reportedly authorized enforcement staff to investigate and subpoena individuals and entities involved in the buying and selling of the cryptocurrency.

Citing anonymous sources with direct knowledge of the matter, Terret noted that subpoena recipients were instructed by the SEC to keep the investigation strictly under wraps if they wanted further details regarding the investigation.

Related: Franklin Templeton lists Ethereum ETF on DTCC

The “Ethereum 2.0” investigation was reportedly based on the SEC’s belief that potential unregistered offerings and sales of Ether occurred since at least 2018.

If the Gensler SEC finds Ether to be a security, it will contradict prior SEC guidance under former Chair Jay Clayton. In June 2018, then-Director of Corporation Finance Bill Hinman stated in a speech the SEC’s position that Ether, alongside Bitcoin (BTC), was not a security.

The new filings disclosed 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, where he refused to answer repeated questions on whether the SEC believed Ether to be a security.

The news comes a few days after applicants and firms involved in a potential spot Ether exchange-traded fund in the U.S. claimed that the SEC will likely delay its decision on whether to approve such a product in May.

Bloomberg ETF analyst Eric Balchunas believes that Gensler’s stance on Ether could impact the decision process, as Gensler refused to clarify whether Ether was a security last year.

Magazine: Synthetix founder Kain Warwick: It’s DeFi that’s wrong, not the market

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