Ethereum has received a celebratory boost in otherwise fallow markets after it was announced late yesterday that the Securities and Exchange Commission has closed its “Ethereum 2.0” investigation, according to Consensys.
Consensys sued the SEC in April. In its complaint, the company said the SEC had tried to “regulate ETH as a security, even though ETH has none of the characteristics of a security – and even though the SEC has previously told the world that ETH is not a security, and not within the statutory jurisdiction of the SEC,” the 34-page complaint reads.
It stemmed from news in March that the Ethereum Foundation was being investigated by an unnamed “state authority.” But now that investigation has been stopped.
“This means that the SEC will not file charges because the sales of ETH are securities transactions,” the Ethereum software company wrote on Twitter last night.
At the time of writing, the Ethereum price is just above $3,500 after gaining 3.1% in the past 24 hours. That means the world’s second-largest cryptocurrency by market capitalization is up 13.8% from a month ago, according to data from CoinGecko.
According to CoinGecko, spot trading volume has reached $21 billion in the past 24 hours. The only time ETH trading volume was higher in the past month was on May 24, the day after the SEC approved Ethereum ETFs for trading.
It’s not just ETH that has seen a rise.
Many of the coins closely associated with Ethereum, such as the liquid restaking protocol Lido DAO’s governance token (LDO), the decentralized domain name service Ethereum Name Service (ENS) and the fourth largest Ethereum DeFi protocol Maker (MKR) are all seeing double-digit gains seen. in the past day.
But halting the SEC investigation won’t be enough to undo the damage to the rest of the industry, Coinbase Chief Legal Officer Paul Grewal argued on Twitter.
“But what about the ecosystem? What about the promotional statements? What about the efforts of others,” he wrote. “How do you explain both this decision and the other projects maligned by the SEC’s failed Howey analysis?”
The SEC has been using its so-called Howey Test for years to determine whether an asset meets the definition of a security and therefore must be registered with the SEC. But that has drawn backlash from SEC committeeman Hester Peirce, law professors and lawmakers – all claiming it was an outdated and inappropriate test to apply to cryptocurrencies.
Things got even scarier when SEC Chairman Gary Gensler himself specifically indicated that evidence of equity assets could qualify as securities under the Howey Test – right after the merger with Ethereum.
That’s why the subject of the SEC’s investigation is called “Ethereum 2.0.” Ethereum became a proof-of-stake network after its merger in September 2022, moving from proof-of-work, like Bitcoin, to proof-of-stake consensus mechanism.
Since then, there has been an ongoing list of assets named in lawsuits filed by the SEC accusing companies of trading in unregistered securities. Analysts have even suggested that it is a proof of work that has kept some coins, such as Litecoin (LTC) and Dogecoin (DOGE), out of the regulator’s sights.
In April 2023, the indictments against Bittrex alleged that OMG Network (OMG), Dash (DASH), Monolith (TKN), Naga (NGC), Real Estate Protocol (IHT), and Algorand (ALGO) were all securities.
A few months later, the SEC said in its lawsuit against crypto exchange Coinbase that a handful of assets were unregistered securities, including: Binance’s BNB token, the exchange’s now-defunct stablecoin, BUSD, and 10 other tokens: Solana (SOL), Cardano (ADA), Polygon (MATIC), Filecoin (FIL), Cosmos Hub (ATOM), The Sandbox (SAND), Decentraland (MANA), Algorand (ALGO), Axie Infinity (AXS) and COTI ( COTI).
The naming of coins in lawsuits – even before a ruling on whether the allegations were true – was also enough to remove some coins from crypto trading platforms.