SEC closed the book on its Ethereum 2.0 investigation, but legal questions remain

The Securities and Exchange Commission's move to close its "Ethereum 2.0" investigation of Consensys raises the question: So, is ether not a security? Consensys announced on Tuesday that the SEC's enforcement division notified the blockchain and web3 development company that it was closing its investigation into Ethereum 2.0 in a "major win" and said that it meant that the SEC "would not bring charges alleging that sales of ETH are securities transactions.

Consensys previously said the SEC's Director of the Division of Enforcement, Gurbir Grewal, approved the investigation into "Ethereum 2.0" in March 2023 to investigate individuals and entities buying and selling ether. "The SEC reportedly closing its investigation into ether does not mean that this Commission is definitely concluding that ether is not a security," she said. "But it does provide another data point that this Commission has concluded not to bring an action alleging that ether is a security at this time."

"It's possible that they'll come out and say, well, you know Consensys' issuance of eth is not a securities transaction, but it's possible in some other formation eth could be issued as a security, or maybe they'll make some more definitive statement," the former SEC attorney said. "I think the important thing to remember is that I don't think closing this case necessarily means that they have decided that there is no security here.

"At this point, there's no basis to conclude they're changing their stance on aggressive enforcement actions in the crypto space," Fagel said. As for whether the close of Ethereum 2.0 means anything for spot Ethereum ETFs, BakerHostetler's Teresa Goody Guillén says it could lend support.

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