SEC has been investigating ETH for over a year, new court filing shows 

The SEC in March 2023 launched its formal investigation into ether, lawyers from Consensys allege in new, unredacted complaint

article-image

Mark Van Scyoc/Shutterstock modified by Blockworks

share

The US Securities and Exchange Commission has been investigating ethereum and its potential status as a security for over a year, new court filings Monday reveal. 

Consensys, which filed its lawsuit against the SEC last week, alleges the SEC has been quietly building its case against ether since at least early 2023 in a plan to reverse its previous public assertion that the asset is a commodity. 

The crypto firm claims that SEC director of the division of enforcement Gurbir Grewal in March 2023 approved a Formal Order of Investigation into the buying and selling of ether. Formal Orders allow the agency to issue subpoenas and collect witness testimony under oath.

Read more: SEC seeks to regulate ETH as a security, Consensys alleges in lawsuit

The timeline, Consensys says, explains why in April 2023 SEC Chairman Gary Gensler refused to answer whether or not ether was a commodity or a security when asked during Congressional testimony

“He did not want to admit that his SEC had already secretly cemented its power-grab by issuing an order of investigation designating ETH as a security,” Consensys’ team wrote in the unredacted complaint, filed Monday. 

Consensys’ suit makes two major claims. First, that ether is not a security and the SEC’s investigation is unlawful. Second, Consensys says the SEC has plans to target the company for its MetaMask product, which securities regulators say is a broker-dealer. 

Read more: Ether is the Schrödinger’s cat of crypto

Consensys received a Wells notice stating the SEC wanted to pursue an enforcement action against them for alleged securities law violations via its MetaMask Swaps and Staking products, the complaint adds. The Wells notice, according to the complaint, does not mention any charges against Consensys relating to ETH specifically.

Historically, the SEC has targeted specific tokens by naming them as securities in lawsuits it files against exchanges. In the agency’s June 2023 lawsuits against Coinbase and Binance, more than ten tokens — whose issuers were not named as co-defendants — were listed as securities in each complaint. ETH was not listed in either suit. 

Representatives from the SEC declined to comment.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Screenshot 2024-05-23 091855.png

Research

Bitcoin L2s aim to boost scalability while preserving decentralization and security, unlocking a better user experience, and new avenues for Bitcoin-powered innovations. However, no existing Bitcoin L2 leverages the full security of Bitcoin.

article-image

Sponsored

As part of the #Breakout2024 plans, Radix has introduced Token Trek

article-image

House members ask Gensler to keep a “consistent and equitable approach” with ether ETF proposals after the agency approved spot bitcoin ETFs in January

article-image

Using old-world instruments to address crypto user experience challenges goes against what this industry set out to do

article-image

And, weeks of a potential crypto ETF decision are no stranger to chaos

article-image

The FIT21 Act marks the second crypto-focused piece of legislation to advance in Congress this month

article-image

More than half of Solana transactions fail