It turns out that the US Securities and Exchange Commission (SEC) has been investigating Ethereum (ETH) for over a year. It has reportedly been trying to determine since 2023 whether the current number two cryptocurrency is a security or not.

Ethereum still in ambiguity

The spotlight on Ethereum got a little brighter last week when Consensys, the development company behind Ethereum, decided they had had enough and took the SEC to court. They’re pretty miffed about the way the SEC is handling things, especially since the SEC has been sniffing around since early 2023.

The whole mess started to fall apart when the SEC, under the keen eye of Enforcement Division Director Gurbir Grewal, greenlighted an investigation into Ethereum buying and selling in March 2023. They didn’t just stop there; they threw out subpoenas and collected sworn testimony.

SEC Chairman Gary Gensler played coy when pressed during congressional testimony, dodging the question of whether Ethereum was a commodity or a security. But behind the scenes, the SEC had already cranked up their investigative machinery and considered Ethereum a security, which they didn’t shout from the rooftops.

Consensys is fighting back

As for their legal firepower, Consensys makes two main points. First, they are convinced that Ethereum is not a security, and call the SEC’s investigation excessive. Second, they claim that the SEC cleared things up before it released their MetaMask product, suggesting it’s some sort of broker-dealer setup. They even got a Wells Notice, which is basically the SEC’s way of saying, “We might come after you.” Yet none of this Wells drama points specifically to Ethereum.

The legal battle in 2023 was not just about Ethereum. The SEC threw the book at Coinbase and Binance, labeling more than a dozen different assets as securities. However, Ethereum dodged that bullet.

Look back at 2018, and you’ll notice that the SEC took a different stance. At the time, Bill Hinman, the then CFO, said that Ethereum, like Bitcoin, was not a security. Fast forward to the present, and now the SEC seems to think that Ethereum’s recent updates, such as the Merge, may be pushing it into the impact zone.

This legal tangle also digs into Ethereum’s past transactions. Consensys is under fire over its role in Ethereum’s proof-of-stake updates and all operational details such as acquisitions and sales. The SEC is quite convinced that securities sales were taking place even before Ethereum’s big merger in 2018.

To top it all off, Consensys isn’t just sitting back. They are trading blows to prevent the SEC from interfering in Ethereum’s affairs. They decided to launch their legal counterattack immediately after the SEC sent a Wells Notice, signaling a possible crackdown on their MetaMask service.


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