SEC Chairman Gary Gensler testifies on budget before a House Financial Services and General Government Subcommittee hearing on Capitol Hill in W
SEC Chairman Gary Gensler testifies before a House Financial Services and General Government Subcommittee hearing on Capitol Hill in Washington on April 2023. Reuters

KEY POINTS

  • Consensys said SEC's Grewal approved a probe into Ethereum late over its status as a security in March last year
  • Weeks after the investigation's approval, Gensler didn't directly answer Congress' question about ETH being a security
  • GOP majority whip Tom Emmer slammed the SEC's dishonesty as "reprehensible"

Blockchain technology company Consensys continues to stand up to the U.S. Securities and Exchange Commission (SEC) over the regulator's unclear view of Ether (ETH), the native cryptocurrency of decentralized blockchain platform Ethereum.

In a Monday filing, Consensys revealed that Gurbir Grewal, head of the SEC's enforcement division, approved a formal order of investigation into ETH's status as a security on March 28, 2023, indicating that the regulatory agency under chair Gary Gensler deemed the crypto market's top 2 digital asset a security for at least over a year now. The said order authorized SEC enforcement personnel to subpoena and investigate entities and people involved in business with Ethereum.

Consensys, which sued the SEC regarding the regulator's unclear stance on ether, said it received three subpoenas last year from the agency that contained "two dozen distinct requests for information, many comprising several detailed sub-requests."

Not only do the subpoenas demand information on Consensys' ETH sales, but also information related to the work its developers are doing for Ethereum and the platform's "transition from a proof-of-work to a proof-of-stake validation mechanism."

The blockchain firm went on to cite then-director of the SEC's corporation finance unit Bill Hinman, who said in 2018 that ETH is not a security.

Days after Grewal approved the investigation into Ethereum, Gensler appeared before U.S. Congress and refused to clarify to lawmakers whether it deemed ETH as a security. "Unwilling to state its position publicly, by early 2023 the SEC had already made what it knew would be a destabilizing reversal of its declaration that ETH was not a security," Consensys said in its latest filing.

Consensys further revealed that it asked the regulator for clarification regarding its information requests but staff declined to explain why the SEC deemed the blockchain platform's Ether sales may have been in violation of securities laws "or why the agency believes it now has jurisdiction over ETH."

The cryptocurrency community didn't take the news well, with many condemning the SEC for not being forthcoming if it already deemed ETH as a security since last year.

"There's no need to keep secrets like this from the people you claim you're protecting and who pay your salary," one user wrote on X (formerly Twitter). Prominent crypto investor Ryan Sean Adams said Gensler's SEC has been on a "multi-year crusade to misrepresent Ethereum as a security."

Lawmakers are also displeased with the revelation. Republican majority whip Tom Emmer blasted the SEC's "regulatory dishonesty" as a "reprehensible" move and threatens the United States' financial leadership on the global stage.

Rep. Patrick McHenry, R-N.C., who pressed Gensler in April 2023 regarding Ether being a security, told FOX Business' Eleanor Terett Monday that Consensys' big reveal was yet another example of the "arbitrary and capricious nature" of the regulatory agency's enforcement approach toward digital assets.

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