U.S. Firms Receive Subpoenas as SEC Seeks to Classify Ethereum as a Security
The U.S. Securities and Exchange Commission (SEC) has reportedly initiated a legal campaign to classify Ethereum, the world’s second-largest cryptocurrency, as a security.
According to a Fortune report, U.S. companies that have received subpoenas related to the investigation believe the SEC’s actions are delivering a significant setback to the crypto industry’s hopes for the approval of Ethereum ETF applications by major players like BlackRock.
Key points:
- The SEC is demanding companies provide documents and financial records related to their dealings with the Ethereum Foundation.
- The investigation began shortly after Ethereum’s shift to a “proof-of-stake” governance model in September 2022.
- The proof-of-stake transition has provided the SEC with a new pretext to attempt to define Ethereum as a security.
- They describe the subpoenas as narrow and focused on the Swiss-based Ethereum Foundation.
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The SEC’s investigation involves compelling companies to furnish any documents and financial records they may have regarding their interactions with the Ethereum Foundation.
SEC’s Ethereum probe reportedly started after proof-of-stake transition
According to individuals at companies that received the subpoenas, the SEC’s probe commenced shortly after Ethereum’s transition to a new governance model known as “proof-of-stake” in September 2022. Ethereum switched to a proof-of-stake model that relies on a reliable network of validators, abandoning Bitcoin’s energy-intensive model.
As per the people familiar with the subpoenas at three different companies, this change has reportedly given the SEC a new justification to try and classify Ethereum as a security.
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These individuals requested anonymity for both themselves and their firms. They also cited concerns about potential retaliation from SEC Chair Gary Gensler, whom one described as “vindictive.”
The subpoenas are characterized as narrow in scope and centered on the Ethereum Foundation, with one individual noting that they received the subpoena within the past few weeks.
