SEC, Chair Gary Gensler Believed Ether Was a Security, Lawsuit Reveals

Court documents filed by Consensys against the US Securities and Exchange Commission (SEC) have revealed that the agency, under Chair Gary Gensler, may have considered Ether (ETH) an "unregistered security" since last year.

This lawsuit was filed on April 25 in a Texas federal court in response to a Wells notice from the SEC.

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According to the filing, Gurbir Grewal, head of the SEC's Division of Enforcement, approved "Ethereum 2.0" — an investigation into the cryptocurrency's status — on March 28, 2023.

The investigation reportedly stemmed from the SEC's concerns dating back to 2018, suggesting potential unauthorized sales and offerings of Ether.

This probe enabled the SEC to subpoena and investigate traders and organizations involved with ETH while reportedly instructing them to keep the investigation's details confidential.

This uncertainty has considerable implications for the approval of Ether-based exchange-traded funds (ETFs) in the US, which are likely to face delays due to the lack of engagement on the SEC's part.

Interestingly, the current stance of the Chair of the SEC contradicts his previous beliefs; in 2018, Gensler claimed that over 70% of the crypto market, including Bitcoin, Ether, Litecoin, and Bitcoin Cash, were not securities.

Nonetheless, the investigation and debate around Ether's classification could impact the crypto regulatory framework in the US.