It was not too long ago that the Securities and Exchange Commission determined Ethereum (ETH) NOT to be a security. But times change, and new leaders take over. In this case, it is the Chairman of the SEC, Gary Gensler.
According to an X distributed by Congressman Patrick McHenry, Chairman of the House Financial Services Committee, the SEC is moving towards declaring Ethereum a security, which means it must comply with US Securities law.
“Reports indicate @GaryGensler is moving to unilaterally classify #ETH as a security. This is contrary to the @CFTC’s assessment and the @SECgov’s prior actions. Congress decides the SEC’s jurisdiction and budget, Chair Gensler doesn’t get to make it up as he goes along.”
While Chair Gensler has consistently stated that Bitcoin is not a security during his tenure at the Commission, he has never made a similar statement about Ethereum.
When Jay Clayton was Chairman of the SEC, his head of Corporate Finance, Bill Hinman, memorably made the public statement that Ethereum would not be treated as a security because it was too decentralized. In 2018, Hinman said:
“And putting aside the fundraising that accompanied the creation of Ether, based on my understanding of the present state of Ether, the Ethereum network, and its decentralized structure, current offers and sales of Ether are not securities transactions. And, as with Bitcoin, applying the disclosure regime of the federal securities laws to current transactions in Ether would seem to add little value.”
The twist in this statement is that at that time, Ethereum was a Proof of Work (PoW) crypto – just like Bitcoin. Since then, Ethereum has migrated to Proof of Stake (PoS), something Gensler may leverage if he attempts to renege on the Commission’s prior declaration.