SEC and Gary Gensler viewed Ethereum as a security for more than a year, new filings reveal

While Bitcoin has been recognized as a commodity, the same cannot be said for the status of Ethereum, which has been more ambiguous since its initial coin offering (ICO) in 2014.

However, a new report suggests that the Securities and Exchange Commission (SEC) and its chairman, Gary Gensler, appear to have believed that Ethereum is an unregistered security for a long period of time.

The SEC and Gensler beliefs set forth

According to the latest FOX report, court documents filed by Consensys on April 29 stated that the SEC and Gensler appeared to have believed for at least a year that Ether was an unregistered security and that it had been traded in violation of federal regulations current

The latest development follows Consensys filing an unredacted complaint against the agency in federal court in Texas in response to receiving a “Wells notice,” which outlined the SEC’s plans to sue the company for Ethereum software for alleged violations of federal securities laws.

The filing indicated that the SEC initiated an investigation called “Ethereum 2.0” due to its belief that potential sales of certain securities, including Ether, had been occurring since at least 2018. If the SEC led by Gensler believed that the ‘asset was a value, would contradict previous guidance given by former president Jay Clayton.

In a now-infamous 2018 speech, then-CFO Bill Hinman said that Ethereum, like Bitcoin, was not a security, leading the industry to believe that the SEC would not regulate the two major cryptocurrencies, citing “sufficient decentralization.”

However, a year later, the Commodity Futures Trading Commission (CFTC) classified Ether as a commodity. Consensys, in its lawsuit, emphasized that it built its business under this regulatory clarity.

The new filings reveal that the five-member commission approved the “Ethereum 2.0” investigation on April 13, 2023, just five days before Gensler appeared before the House Financial Services Committee, where he dodged questions from the chairman of the committee, Patrick McHenry, on the regulatory state of Ethereum.

The beginning of the investigation was marked by an unusual secrecy. The FOX report even claimed that subpoena recipients were instructed to sign nondisclosure agreements to receive information about the probes’ progress. It is not clear why the SEC kept this secret.

Lawsuit by Consensys v. SEC

Consensys filed a lawsuit against the SEC last week regarding its handling of Ethereum regulation. The company claimed that the watchdog has classified Ether as a security and targeted the company’s Metamask software.

The complaint also mentioned that SEC staff sent Consensys a notice from Wells earlier this month, indicating the agency’s intent to take enforcement action. Consensys has maintained that it has cooperated with the SEC and even provided more than 88,000 pages of documents in response to multiple subpoenas over the past year.

Consensys also argued that any investigation stemming from considering Ether as a security would violate the company’s Fifth Amendment rights and the Administrative Procedure Act.

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