The US Securities and Exchange Commission (SEC) has spent years pursuing its lawsuit against Ripple Labs for allegedly selling unregistered securities in the form of XRP.
However, the commission has made no such attempt to crack down on Ethereum, leading to allegations it received preferential treatment.
In the latest twist in the “ETH Gate” saga, Steven Nerayoff, an early adviser to the Ethereum network, has revisited how the SEC responded to Ethereum’s Initial Coin Offering (ICO), and the lasting implications of that response.
Steven Nerayoff, an early Ethereum advisor, has questioned the SEC’s cryptocurrency approach, highlighting the agency’s focus on XRP and similar tokens as securities while leaving bitcoin and ether untouched.
Specifically, Neyaroff casts doubt on how the SEC came to the conclusion that Ethereum is “sufficiently decentralized” to avoid scrutiny, a classification from former SEC director William Hinman.
“How exactly did @ethereum even satisfy this magical agency pixie dust?” he asked, speculating that Hinman and his SEC colleagues may have even intentionally misconstrued the network’s decentralized nature.
In response to Nerayoff’s remarks, John Deaton, a crypto lawyer known for advocating XRP, hinted at close interactions between senior SEC staff and Ethereum’s founders, suggesting a potentially questionable working relationship.
In a video shared to X (formerly Twitter), comments attributed to Ethereum co-founder Joseph Lubin could even imply some kind of back-room deal with the SEC.
“We are big friends and fans of the SEC,” Lubin purportedly stated. He would go on to state that the SEC wouldn’t find any other tokens except Bitcoin and Ether sufficiently decentralized, even dropping Hinman’s name as his source, the video alleges.
In another tweet on Sunday, September 17, Deaton added, “I’ve always said that one day we will get the full truth. Today is one day closer.”
Central to ETH Gate allegations is the charge that, contrary to Hinman’s classification, the Ethereum ICO actually displayed far less evidence of decentralization than other ICOs.
For example, an analysis of ETH transactions at the time of its ICO concludes that a significant proportion of the earliest ETH went to a small number of investors.
“Most of the Ether sold in the 2014 token pre-sale in exchange for Bitcoin may have been paid out to one person or, more likely, a handful of close associates working in concert,” the report observes.
To this day, the identity of Ethereum whales that hold a significant volume of ICO funds remains shrouded in mystery.
With ETH Gate casting doubt on the network’s decentralization, allegations of Chinese control continue to circulate.
Specifically, critics have speculated that through Ethereum ICO investors such as Wanxiang Blockchain Labs, the Chinese Communist Party is Ethereum’s biggest whale, secretly controlling as much as a third of the ETH supply.