The crypto industry received a boost of clarity and optimism when the United States Securities and Exchange Commission (SEC) concluded its investigation into Ethereum 2.0, announcing that it would not pursue any enforcement action. The ruling marks a significant victory for Ethereum and could serve as a critical reference point for the treatment of digital assets under U.S. 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 feature evolution and the transition to Ethereum 2.0, the SEC revisited this position, hinting at possible regulatory oversight. This change led to increased scrutiny and uncertainty within the Ethereum community, culminating in a lawsuit filed by Consensys on April 25, 2024. The lawsuit sought to uphold the classification of ETH as a commodity, arguing that the SEC did not have jurisdiction over its commerce and governance. .
In a crucial answer dated June 7, 2024, Consensys urged the SEC to recognize approvals of Ethereum-based ETFs made earlier in May, which were based on the assumption that ETH is a commodity. Consensys argued that this should permanently end the SEC’s investigation into Ethereum 2.0.
The Enforcement Division of the SEC officially replied on June 18, 2024, as communicated in a letter to Kevin S. Schwartz, attorney for Consensys. The letter stated: “We are writing to inform you that we have concluded the investigation into the matter mentioned above (…) based on the information available to us to date, we do not intend to recommend enforcement action by the Commission. »
It is important to note that the SEC underlines that this closure should not be considered an exoneration nor should any action ultimately result from the staff investigation. Nevertheless, Laura Brookover, attorney at Consensys, highlighted the importance of this development, stating: “The SEC today sent us a closing letter in the Ethereum 2.0 investigation. Things have changed remarkably quickly since we filed our complaint against the SEC in late April, culminating in today’s development.
This resolution can be seen as a critical moment for the entire crypto industry, particularly regarding how digital assets are classified and regulated. Alexander Grieve of Paradigm noted the tone of the SEC’s notice, commenting: “They are quite cautious/evasive in their notice, BUT it is relatively unusual for the SEC to specifically point out to a company that it has closed an investigation.” »
Closing this investigation without enforcement action could set a precedent for how other cryptocurrencies are treated by regulatory agencies, potentially easing the regulatory environment for digital assets.
Although the immediate threat of enforcement action has been eased, Consensys and the entire crypto industry are considering further clarity on regulatory policy. Consensys, in its lawsuit, also seeks a ruling from the Federal Court regarding its operations, saying they do not act as broker-dealers and do not issue securities through their software offerings like MetaMask Swaps and staking.
As stated in their lawsuit, “Consensys relies on creating software products that enable people around the world to use and grow the Ethereum network, and it has the right to run its business without the cost, burden and the uncertainty of illegal activity.” coercive measures. »
At press time, the price of Ether (ETH) responded favorably to the SEC’s decision, posting a notable increase of 3.3%, bringing it to a current price of $3,561.
Featured image created with DALL·E, chart from TradingView.com
