The cryptocurrency industry received a major jolt of clarity and optimism as the US Securities and Exchange Commission (SEC) concluded its investigation into Ethereum 2.0, announcing that it would not be taking any enforcement actions. This decision represents an important victory for Ethereum and could serve as a critical reference point for the treatment of digital assets under US securities law.
Ethereum is not a security
In 2018, the Securities and Exchange Commission (SEC) made the key distinction that ether was not a security. However, by 2023, amid the evolution of functionality and the transition to Ethereum 2.0, the SEC reconsidered this position, hinting at possible regulatory oversight. This shift has led to increased scrutiny and uncertainty within the Ethereum community, culminating in a lawsuit filed by ConsenSys on April 25, 2024. The lawsuit aims to assert Ethereum's classification as a commodity, arguing that the SEC lacks jurisdiction over its trading and governance. .
In a pivotal response dated June 7, 2024, ConsenSys urged the SEC to recognize approvals of Ethereum-based ETFs made earlier in May of that year were based on the assumption that Ethereum is a commodity. Consensys argued that this should definitively end the SEC's investigation into Ethereum 2.0.
Officially the SEC's Enforcement Division He responded On June 18, 2024, as stated in a letter addressed to Kevin S. Schwartz, Consensys' attorney. “We are writing to provide notice that we have concluded the investigation into the matter referred to above (…) based on the information available to us to this date, and do not intend to recommend enforcement action by the Commission,” the letter said.
Most importantly, the SEC He confirmed That this closure should not be viewed as an exoneration or that no action may ultimately result from the staff investigation. However, Laura Brookover, an attorney at Consensys, emphasized the importance of this development, saying: “The SEC sent us a closing letter in its Ethereum 2.0 investigation today. Things have changed remarkably quickly since we filed our lawsuit against the SEC in Late April, culminating in today's development.”
This decision could be seen as a defining moment for the broader cryptocurrency industry, particularly with regard to how digital assets are classified and regulated. Paradigm's Alexander Greif noted the tone of the SEC's notice, commenting: “They are quite hedging/evasive in their notice – but it is relatively unusual for the SEC to specifically highlight a company has closed an investigation. “
Closing this investigation without enforcement action could set a precedent for how regulators treat other cryptocurrencies, potentially facilitating the regulatory environment for digital assets.
While the immediate threat of enforcement action has been mitigated, Consensys and the broader cryptocurrency industry are looking forward to further clarifications in regulatory policy. In its lawsuit, Consensys also seeks a federal court ruling regarding its operations, asserting that it does not act as brokers and does not issue securities through its software offerings such as MetaMask Swaps and Stake.
As stated in the lawsuit, “Consensys is built on creating software products that allow people around the world to use and build on the Ethereum network, and is entitled to conduct its business without the cost, burden, or uncertainty of an illegal enforcement action.”
At press time, the price of Ethereum (ETH) has responded positively to the SEC's decision, showing a notable increase of 3.3%, reaching its current trading price of $3,561.
Featured image created with DALL·E, chart from TradingView.com
