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SEC Ends Investigation into Ethereum’s Status — Consensys Announces

ByDayne Lee

Jun 21, 2024

SEC Ends Investigation into Ethereum’s Status — Consensys Announces

The United States Securities and Exchange Commission (SEC) has officially concluded its investigation into whether Ether (ETH), the cryptocurrency associated with the Ethereum network, qualifies as a security. This significant development was shared by Ethereum developer Consensys in a June 19 post on the social media platform X.

“The Enforcement Division of the SEC has notified us that it is closing its investigation into Ethereum 2.0,” Consensys stated. This decision means the SEC will not pursue charges alleging that sales of ETH constitute securities transactions. The announcement was welcomed by Consensys as a “major win for Ethereum developers, technology providers, and industry participants.”

Background of the SEC Investigation

The investigation’s conclusion follows a letter sent by Consensys to the SEC on June 7, requesting an end to the inquiry into Ether. This request was made in the context of the SEC’s approval of spot Ether exchange-traded funds (ETFs) in May, which implied recognition of ETH as a commodity rather than a security.

March 2023SEC issues subpoenas related to classifying ETH as a security.
April 2023Consensys files a lawsuit against the SEC following a Wells notice regarding MetaMask.
May 2023SEC approves spot Ether ETFs, suggesting ETH is treated as a commodity.
June 7, 2023Consensys sends a letter to the SEC requesting an end to the Ethereum investigation.
June 19, 2023SEC notifies Consensys of the closure of the investigation into Ethereum 2.0.

This timeline outlines the major events leading to the SEC’s decision to end its investigation into Ethereum.

Consensys senior counsel, Laura Brookover, shared the SEC’s response letter, which indicated that the agency does not “intend to recommend an enforcement action.” This decision marks a turning point in the ongoing discussions and legal battles surrounding Ethereum’s regulatory status.

Despite the significant implications of this development, an SEC spokesperson told Cointelegraph that the agency “does not comment on the existence or nonexistence of a possible investigation.” This standard SEC protocol maintains confidentiality regarding the specifics of their inquiries.

SEC’s Scrutiny of Ethereum

The SEC’s scrutiny of Ethereum dates back several years. In March 2023, Fortune reported that the SEC had issued subpoenas to multiple companies as part of its efforts to determine if ETH should be classified as a security. This move was part of a broader regulatory crackdown on the crypto industry under SEC Chair Gary Gensler’s leadership.

In April 2023, Consensys responded to this increased scrutiny by suing the SEC shortly after receiving a Wells notice from the agency. The notice suggested that MetaMask, Consensys’ popular crypto wallet, might have violated securities laws. The lawsuit alleged that the SEC and its Chair, Gary Gensler, had considered ETH a security since at least early 2023. Consensys also claimed that SEC Division of Enforcement Director Gurbir Grewal approved a formal investigation into Ether’s status on March 28, 2023.

Despite the SEC’s decision to drop its investigation into Ethereum 2.0, the legal battle between Consensys and the SEC is ongoing. In its latest post, Consensys confirmed that its lawsuit against the SEC remains active. This lawsuit continues to challenge the regulatory uncertainty surrounding Ethereum and other digital assets.

Implications for the Crypto Industry

The SEC’s decision to end its investigation into Ethereum is a notable development for the broader cryptocurrency industry. It could signal a more favorable regulatory environment for Ethereum and other blockchain projects, fostering greater innovation and growth within the sector.

Following the announcement, market observers and Ethereum stakeholders are likely to monitor the SEC’s regulatory stance closely. The agency’s decision may influence ongoing discussions about the classification of other digital assets and the future of cryptocurrency regulation in the United States.

The SEC’s decision to drop its investigation into Ethereum 2.0 marks a significant moment for the cryptocurrency industry. As Consensys celebrates this victory, the ongoing legal and regulatory challenges highlight the evolving landscape of digital asset regulation. The resolution of these issues will play a crucial role in defining the future of blockchain technology and its integration into the global financial system.

Featured image credit: Freepik

Dayne Lee

With a foundation in financial day trading, I transitioned to my current role as an editor, where I prioritize accuracy and reader engagement in our content. I excel in collaborating with writers to ensure top-quality news coverage. This shift from finance to journalism has been both challenging and rewarding, driving my commitment to editorial excellence.

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