SEC Closes Ethereum 2.0 Investigation With no Clear Conclusions

The U.S Securities and Exchange Commission (SEC) has dismissed its investigation case into Ethereum 2.0. Consensys, a blockchain company owned by one of Ethereum’s founders, Joseph Lubin announced this on Tuesday.

However, the agency gave no clear answer on whether Ethereum is a security or not. According to Consensys, the SEC’s enforcement division notified the blockchain and web3 development company that it was closing its investigation into Ethereum 2.0, meaning that the agency “would not bring charges alleging that sales of ETH are securities transactions.”

The notification was in response to Consensys’s letter in June asking the SEC to confirm that it was ending investigations into Ethereum 2.0 following approval of the spot ether exchange-traded fund in May.

“While we do not with this notice, or otherwise, agree with the factual statements or legal conclusions set forth in the June 4 Letter, based on the information we have as of this date, we do not intend to recommend an enforcement action by the Commission against your client, Consensys Software Inc. with respect to this investigation,” the SEC said in a June 18 letter sent to Consensys from the SEC’s Chicago Regional Office.

The Question of Ethereum Being a Security

There’s a long standing debate on whether Ethereum is a security. While SEC Chair Gary Gensler has always stated that Ethereum is a security, his counterpart at the Commodities and Futures Trading COmmission (CFTC), Rostin Behman believes Ethereum is a commodity.

The question came alive again when companies started clamoring for an Ethereum ETF earlier this year, and though spot ether ETFs have been approved, there remains a gray area on the question. 

A partner at BakerHostetler law firm and former litigation counsel for the SEC, Teresa Goody Guillén in an email said the SEC’s dismissal of investigation against Ethereum 2.0 is a positive sign for the crypto project.

“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.”

Also commenting, a former SEC enforcement attorney said the SEC may have decided that Ethereum is not a security, or may consider the case too high a litigation risk to go into.

Consensys to Continue Suit Against SEC

Despite the SEC dropping its investigation of Ethereum 2.0, Consensys says it is determined to continue with its court case against the SEC. 

The company is insisting that the SEC grant relief for Metamask, its crypto wallet and for the agency to say that Consensys isn’t acting as a broker-dealer or participating in the sale of securities through its MetaMask Swaps and MetaMask Staking products.