The crypto industry received a major jolt of clarity and optimism when the US Securities and Exchange Commission (SEC) concluded its investigation into ethereum 2.0 and announced that it will not take any enforcement action. This decision marks a major victory for ethereum and could serve as a critical benchmark for the treatment of digital assets under US securities law.
ethereum is not a security
In 2018, the SEC made a key distinction that Ether was not a security. However, by 2023, amid the evolution of functionalities and the transition to ethereum 2.0, the SEC revised this stance, hinting at possible regulatory oversight. This change generated increased scrutiny and uncertainty within the ethereum community, culminating in a lawsuit filed by Consensys on April 25, 2024. The lawsuit aimed to confirm the classification of eth as a commodity, arguing that the SEC lacked jurisdiction over its trade and governance. .
In a fundamental response dated June 7, 2024, Consensys urged the SEC to recognize approvals of ethereum-based ETFs made in early May, which were based on the assumption that eth is a commodity. Consensys argued that this should conclusively end the SEC's investigation into ethereum 2.0.
The SEC Enforcement Division officially answered on June 18, 2024, as communicated in a letter addressed to Kevin S. Schwartz, Consensys attorney. The letter said: “We write to notify that we have concluded the investigation in the aforementioned matter (…) based on the information we have to this date, we do not intend to recommend enforcement action by the Commission.”
It is important to note that the SEC ethereum-2-0-investigation-will-not-pursue-ethereum-enforcement” target=”_blank” rel=”noopener nofollow”>underlined that this closure should not be viewed as an exoneration or that ultimately no action may be taken as a result of the staff investigation. However, Laura Brookover, an attorney at Consensys, highlighted the importance of this development, stating: “The SEC sent us a closing letter today in the ethereum 2.0 investigation. “Things have changed remarkably quickly since we filed our lawsuit against the SEC in late April, culminating in today’s development.”
This resolution can be perceived as a critical moment for the crypto industry as a whole, particularly in the way digital assets are classified and regulated. Alexander Grieve of Paradigm highlighted the tone of the SEC notice, commenting: “They are quite evasive in their notice, BUT it is relatively unusual for the SEC to specifically highlight to a company that they have closed an investigation. “
Closing this investigation without enforcement measures could set a precedent for how regulatory agencies treat other cryptocurrencies, which could ease the regulatory environment for digital assets.
While the immediate threat of enforcement action has been alleviated, Consensys and the broader crypto industry are seeking further clarification in regulatory policy. In their lawsuit, Consensys also seeks a federal court ruling regarding their operations, stating that they do not act as brokers or issue securities through their software offerings such as MetaMask Swaps and Sumbling.
As stated in its lawsuit, “Consensys is built on creating software products that enable people around the world to use and build on the ethereum network, and has the right to run its business without the cost, burden and uncertainty from an illegal network. enforcement action.”
At press time, the price of Ether (eth) has responded favorably to the SEC's decision, showing a notable increase of 3.3%, bringing it to a current trading price of $3,561.
Featured image created with DALL·E, chart from TradingView.com
