SEC Chief Gary Gensler Views ETH as Unregistered Security

A recent development sheds light on the Securities and Exchange Commission's (SEC) stance on Ethereum (ETH), revealing Chairman Gary Gensler's belief that ETH was considered a security for a period of time.

Revelation from Consensys Complaint

Ethereum software firm Consensys filed a complaint against the SEC in the Federal Court of Texas on April 25, prompting a significant disclosure. Court documents filed by Consensys on April 29 unveiled the SEC's position, indicating that Chairman Gary Gensler had asserted ETH's status as an unregistered security, potentially breaching federal regulations.

Formal Investigation

The revelation stems from a formal order issued by Gurbir Grewal, head of the SEC's Division of Enforcement, on March 28, 2023. This order sanctioned an investigation into Ether's status, commonly referred to as the Ethereum 2.0 investigation. The SEC authorized enforcement staff to probe individuals and entities involved in cryptocurrency transactions.

Basis of Investigation

The Ethereum 2.0 investigation was triggered by the SEC's suspicion of potential unregistered offerings and sales of ETH since 2018. Despite ongoing scrutiny, Gary Gensler had refrained from definitively classifying Ether as a security over the past year.

Impact on Spot Ethereum ETF Approval

The SEC's classification of Ethereum as a security has cast uncertainty over the approval of spot Ethereum ETFs, following the approval of 11 spot Bitcoin ETFs in January. While anticipation for spot Ethereum ETF approval was high, ongoing investigations into exchanges have stalled progress. Crypto market experts had hoped for a potential approval in May, but the SEC's stance has created obstacles.

Public Perception and Ripple Case Parallel

Crypto investors have accused the SEC, particularly Chief Gary Gensler, of deliberately delaying Ethereum ETF approval. The outcome of Consensys' complaint awaits court judgment. Notably, the lawsuit between the SEC and Ripple saw a partial victory for Ripple, with the court ruling that XRP is not a security.

The revelation of the SEC's investigation into Ethereum's security status introduces uncertainty into the cryptocurrency market, potentially delaying regulatory approval processes. Investors remain skeptical amid accusations of deliberate delays, awaiting clarity from legal proceedings.