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The Securities and Exchange Commission (SEC), led by Chairman Gary Gensler, has been operating under the belief that Ethereum (ETH), the second-largest cryptocurrency, is an unregistered security, a position it has held for at least a year, FOX Business reported Monday, citing recent court filings.
The allegations emerged from a lawsuit filed last week by Ethereum software company ConsenSys, which is challenging the SEC's attempt to classify Ethereum as a security. ConsenSys' legal action follows a Wells Notice from the SEC indicating its intention to sue the company for failure to comply with federal securities laws.
According to FOX Business, the documents reveal that the SEC's Enforcement Division, under the direction of Gurbir Grewal, launched a formal investigation into Ethereum's status as a security in March 2023. The investigation, dubbed the “Ethereum 2.0” investigation, aims to look into transactions and activity related to Ethereum dating back to at least 2018.
A source familiar with the matter told FOX Business that the SEC has sent multiple document requests and subpoenas to Ethereum-related companies, including ConsenSys, while MetaMask's parent company has reportedly received four subpoenas and a Wells Notice from the SEC.
The SEC's current position appears to contradict previous guidance from 2018, when then-SEC Corporation Finance Director Bill Hinman said Ethereum was not considered a security due to its decentralized nature. By comparison, the Commodity Futures Trading Commission later classified ETH as a commodity.
ConsenSys' lawsuit against the SEC aims to have the court resolve the dispute over Ethereum's regulatory status and could have far-reaching implications for the crypto industry, similar to previous lawsuits against major platforms like Coinbase and Kraken.
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