The Gary Gensler-led Securities and Exchange Commission (SEC) began investigating Ethereum’s security status last year, according to an April 29 court filing by Consensys.

The filing disclosed that Gurbir Grewal, the Director of the Division of Enforcement, sanctioned the Formal Order of Investigation concerning ‘Ethereum 2.0’ in March 2023. This Formal Order conferred broader authority upon SEC staff to investigate and subpoena individuals and entities involved in ETH transactions.

It added:

“The Formal Order predicates this delegation on the SEC’s information showing 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.’”

Subsequently, the SEC has issued subpoenas to numerous individuals and entities with investments in Ethereum, including Consensys.

Notably, this revelation emerged a few days after Consensys lodged a legal action against the SEC on April 25. The company contended that the SEC’s attempt to classify Ethereum as a security represented regulatory overreach, warning that such a designation could stifle innovation and adversely affect developers, investors, and entities utilizing Ethereum’s decentralized infrastructure.

Ethereum’s regulatory status

Ethereum’s regulatory status has been a persistent issue for the SEC in recent years.

In 2018, Gensler stated during a lecture at the Massachusetts Institute of Technology that ETH is not considered a security.

However, Gensler’s stance seems to have shifted, particularly following Ethereum’s transition to proof of stake. Despite this, he has refrained from definitively addressing ETH’s status, despite numerous inquiries from stakeholders, including members of Congress.

While Gensler has remained silent on the matter, proponents in the crypto community have cited remarks from former SEC officials like Bill Hinman, as well as legal filings from financial regulatory bodies such as the Commodities Futures Trading Commission, to argue that Ethereum does not meet the criteria for classification as a security.

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