Crypto Firms Under Investigation by SEC over Ethereum Classification
The United States Securities and Exchange Commission (SEC) has reportedly issued subpoenas to several U.S. businesses as part of a “legal campaign” to officially classify Ethereum as a security, according to an article by Fortune.
SEC Subpoenas Cryptocurrency Companies for Information on Ethereum Foundation
Fortune’s Leo Schwartz and Jeff Roberts reveal that three prominent cryptocurrency businesses have received subpoenas from the SEC requesting records about the Ethereum Foundation, a non-profit organization that supports the Ethereum ecosystem.
An anonymous employee from one of the subpoenaed companies claims that the investigation began shortly after Ethereum transitioned to its new proof-of-stake model in September 2022.
CoinDesk also reported that the foundation is under investigation by a state authority following a GitHub commit made by the company on February 26, 2024. The foundation took down its canary warrant, which indicated that it had never been subject to a private government investigation, on the same day.
SEC’s Stance on Ethereum as a Security Affects Outlook for Ethereum ETFs
The SEC’s position on classifying Ethereum as a security has stalled the approval of an Ethereum ETF. The commission had previously approved several spot Bitcoin ETF applicants in January 2024 without commenting on an Ethereum ETF.
Analysts predicted last month that there was a 50% chance of the token’s SEC approval by May. However, news that SEC Chair Gary Gensler is leading the charge to classify Ethereum as a security has made those odds very unlikely.
Senior ETF analyst for Bloomberg, Eric Balchunas, stated that the odds were “not looking good” for the token’s SEC approval. Correspondingly, fellow Bloomberg ETF analyst James Seyffart believes that the federal agency will ultimately reject Ethereum ETFs in May.
The Bloomberg analysts cited a lack of engagement from the SEC with potential issuers as one of the reasons for the denial, contrasting it with the commission’s approach to spot Bitcoin ETF approval.
SEC Chair Gensler Faces Criticism from U.S. House Committee on Financial Services
SEC Chair Gary Gensler is facing increased scrutiny for his handling of the federal agency. The U.S. House Committee on Financial Services held a hearing to discuss potential reform within the commission.
Congressman French Hill (R-LA) accused the SEC under Gensler’s direction of “blatantly and repeatedly” exceeding its statutory authority.
Cryptonews.com has reached out to Ethereum and the SEC for comment.
Hot Take: SEC Intensifies Investigation into Ethereum Classification
The United States Securities and Exchange Commission (SEC) is ramping up its efforts to classify Ethereum as a security, as it serves subpoenas to several crypto firms. This move could have significant implications for the future of Ethereum, particularly in relation to the approval of an Ethereum ETF.
The SEC’s investigation comes after Ethereum shifted to a new proof-of-stake model and following a GitHub commit made by the Ethereum Foundation. The foundation is now under investigation by both the SEC and a state authority.
SEC Chair Gary Gensler’s push to classify Ethereum as a security has led analysts to believe that an Ethereum ETF approval is unlikely. The lack of engagement from the SEC with potential issuers further supports this view.
Gensler’s handling of the SEC has come under scrutiny, with accusations that he has overstepped his authority. This criticism has sparked discussions about potential reform within the commission.
As the investigation continues, it remains to be seen how Ethereum and the SEC will respond to these developments. The classification of Ethereum as a security could have far-reaching consequences for the crypto industry.
Sources: Fortune
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