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Ethereum Triumphs: SEC Drops Investigation, Paves Way for Ether ETF?

Last Updated June 19, 2024 8:34 AM
Teuta Franjkovic
Last Updated June 19, 2024 8:34 AM

Key Takeaways

  • The SEC closed its probe into Ethereum, meaning no charges will be filed against Ethereum for selling unregistered securities. 
  • The letter didn’t provide a definitive classification on whether Ethereum is a security or a commodity. 
  • The XRP community felt the SEC was biased as Ripple faced an ongoing lawsuit for selling unregistered securities. 
  • Gensler forecasted Ether ETF approvals by September

The SEC has concluded its probe into whether Ethereum’s Ether token should be classified as a security, according to Ethereum developer Consensys. 

Consensys announced  that the SEC’s Enforcement Division is closing its investigation into Ethereum 2.0, indicating that there will be no charges claiming that ETH sales are securities transactions. Will there be Ether ETFs soon, it’s still up to see.

A “Major Win” for the Entire Industry

Consensys hailed this decision as a significant triumph for everyone associated with Ethereum’s development, technology, and industry.

In an official blog, the company wrote :

“Today, the Enforcement Division of the SEC responded by notifying us that it is closing its investigation into Ethereum 2.0 and will not pursue an enforcement action against Consensys.”

This closure follows the SEC’s authorization of Ethereum spot ETFs last month. In response, Consensys had written to the SEC, highlighting that these funds were premised on ETH being treated as a commodity, and queried what this meant for the ongoing investigation.

Consensys attorney Laura Brookover shared the SEC’s official response  On X, and a detailed statement  from the company regarding the SEC’s decision. Brookover noted that the landscape had shifted dramatically since they initiated a lawsuit against the SEC in late April, leading to the current outcome. She confirmed that after over a year, the Ethereum investigation has concluded without any charges being filed.

When ETF? Consensys Pushes for MetaMask Clarity

The SEC’s letter, however, did not provide a definitive stance on Ethereum. It refrained from classifying Ethereum, using standard legal language to suggest that the closure of the investigation does not imply agreement with Consensys’ assertions.

In April, Consensys filed a lawsuit against the SEC, accusing the regulator of excessive regulation by attempting to classify Ethereum as a security. Consensys alleged that the SEC had internally decided to label Ethereum a security a year prior to the lawsuit. The company also contested the SEC’s authority to regulate Ethereum, arguing that the agency had previously stated that Ether was not a security. This legal action was a response to a warning from the SEC suggesting that Consensys’ MetaMask wallet might be violating securities laws.

In a statement on June 19, Consensys reaffirmed its opposition to the SEC’s stance on MetaMask, indicating a commitment to continue challenging the regulator on this matter.

The company emphasized the need for regulatory clarity, stating 

“In our lawsuit, we also seek a declaration that offering the user interface software MetaMask Swaps and Staking does not violate the securities laws. It should not take a lawsuit to provide the much-needed regulatory clarity to allow an industry that serves as the backbone to countless new technologies and innovations to thrive – but here we are.”

SEC Chair Gensler Forecasts Ether ETF Approvals by September Amid Registration Delays

At a budget hearing  on June 13th, SEC Chair Gary Gensler addressed US Senator Bill Hagerty’s question regarding the approval process for Ether ETFs, indicating that the approvals are anticipated to take place this summer.

Gensler provided further insights, stating:

“Individual issuers still are working through the registration process. It’s working smoothly.”

On May 23rd, the SEC approved 19b-4 filings from eight companies, yet these issuers still required approval of their S-1 filings to begin trading on US exchanges. Recently, Gensler clarified  that the approval process for spot Ethereum ETFs hinges on how quickly issuers can address the SEC’s feedback.

He said :

“These registrants are self-motivated to be responsive to the comments they get, but it’s really up to them how responsive they are.”

On the other hand, Nate Geraci, President of ETF Store, expressed his frustration over the prolonged approval process, stating:

Despite concerns about the prolonged approval process, Gensler’s recent comments suggest that the Ether ETFs are likely to be approved by September. This shift from the initially expected June timeline to September is likely intended to give issuers sufficient time to prepare for trading.

XRP Community Cries Foul Over Alleged SEC Bias

Still, while the Ethereum community is celebrating this development, the XRP community has expressed frustration, criticizing the SEC for what they perceive as a biased approach.

Bill Morgan, a notable figure in the XRP community, has openly criticized  the US SEC, pointing out the unequal treatment between Ethereum and Ripple. Morgan emphasized that Ethereum was essentially given a second clearance by the SEC, nearly six years after the Hinman speech, which initially suggested that Ethereum was not a security. He argued that the differing approaches to ETH and XRP underscore the SEC’s inconsistent and arbitrary handling of cryptocurrency regulations.

Some have questioned  why the SEC needed to address ConsenSys in a letter regarding Ethereum, given its decentralized nature. Bill Morgan argued  that the concept of decentralization is essentially a contrived factor and criticized the lack of clarity on how it influences the classification of a token as either a commodity or a security. He pointed out that there has been no clear explanation of the criteria used to determine these categories, highlighting ongoing confusion and inconsistency in regulatory approaches to cryptocurrencies.

The pseudonymous analyst @digitalassetbuy has strongly criticize d the SEC’s regulatory actions, highlighting a stark contrast in the treatment of Ripple compared to Ethereum. The analyst noted that Ripple has spent over $100 million in the past three years addressing regulatory issues imposed by the SEC, a burden not shared by Ethereum. Labeling the government’s actions as potentially criminal, the analyst suggested that Ripple’s top executives, Brad Garlinghouse and Chris Larsen, consider filing a lawsuit against the SEC and others involved, dubbing the situation “ETHGATE.”

There’s a potentially positive development in the ongoing XRP lawsuit, as there are indications that the SEC might reduce the $2 billion fine imposed on Ripple. Such a favorable outcome could potentially trigger a price rally for XRP, potentially pushing it towards $1.

Following this announcement, the price of Ethereum rallied , trading above $3,555, which marked over 3% increase in the last 24 hours.

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