Ethereum’s Security Status
The Securities and Exchange Commission (SEC) believes Ethereum (ETH) is an “unregistered security.” This view is based on the Howey Test, a legal framework that many crypto enthusiasts consider outdated.
SEC’s Investigation
In March 2023, the SEC launched an investigation into Ethereum’s status as a security. The investigation focused on individuals and entities involved in buying and selling ETH tokens.
Proof-of-Stake Mechanism and Regulatory Concerns
The SEC’s investigation was sparked by Ethereum’s transition to a “proof-of-stake” consensus mechanism. This mechanism involves validators staking their Ethereum holdings, which some argue makes it resemble a security more than the original “proof-of-work” mechanism.
ConsenSys’ Lawsuit
Software company ConsenSys filed a lawsuit against the SEC, accusing the agency of overstepping its authority by classifying ETH as a security. The lawsuit provides insights into the SEC’s investigation, including document requests and subpoenas.
SEC’s Focus on Sales of ETH
The SEC is reportedly investigating sales of ETH dating back to 2018, potentially considering them as securities. The investigation has intensified in recent weeks, with ConsenSys receiving additional subpoenas and a Wells notice indicating potential enforcement action.
Ethereum’s Market Impact
The SEC’s investigation has impacted Ethereum’s price, with ETH trading below $3,200 after several failed attempts to consolidate above that level.
