Summary
The SEC is investigating whether Ethereum’s sale of ETH since September 2022 constitutes an unregistered securities offering. Despite the investigation, ETH is likely not considered a security, especially after the network’s transition to proof-of-stake. The SEC’s actions may be a strategic move to maintain regulatory leverage over the crypto market.
Key Points
1. The Securities and Exchange Commission is investigating whether the Ethereum Foundation’s sale of ETH since the September 2022 “Merge” constitutes an unregistered securities offering in violation of US law.
2. ETH tokens are not considered securities in the traditional sense, as they do not confer legal ownership of a business entity or contractual rights to payments. However, the offer and sale of ETH tokens can still be considered an “investment contract” under the Howey test.
3. The SEC’s investigation into Ethereum’s status as a security may be a strategic move to maintain regulatory leverage over the crypto market, potentially impacting the approval of an Ethereum spot ETF application and setting a precedent for other token projects seeking to avoid securities classification.