The SEC appears to be gearing up for a legal challenge to Ethereum as Gensler’s opinion is that ETH is now a security as stakers in the PoS architecture receive rewards for validating transactions on the blockchain. The SEC news headlines regarding cryptocurrencies continue and Gensler, head of the Securities and Exchange Commision (SEC) are focused on ETH, the world’s second largest cryptocurrency by market cap, now operates under proof of stake (PoS) since the famous “Merge” on 15th September this year.
Pretty rude of Gensler, some might say, just as Etherum head honcho Vitalik Buterin was celebrating the successful protocol upgrade that marked one of the most important days in crypto history.
Some might also yawn and say “again?”, given how long the back and forth between Gensler and every crypto that isn’t Bitcoin has been going on.
But this time could be different.
The post-Merge pitfalls
One major feature of Ethereum’s new PoS method is that basically anyone can ‘stake’ their tokens to help with the network’s operations, and earn rewards accordingly.
Gaining financial rewards by allowing someone or something to use your bag? That’s a security, reckons Gensler.
In all fairness, when described like that, you can see his point. But not everyone who owns ETH stakes ETH, so then what happens?
That’s probably what should be meted out in the courts, and according to Bloomberg, the SEC could be gearing up to do just that.
The SEC is also putting a spin on the fact that nearly half of all Ethereum validators are in the US.
“As a result, those transactions took place in the US,” said the SEC. But that means more than half of all ETH transactions aren’t finalised in the US, right?
These statements came to light in a recent dispute between the SEC and crypto YouTuber Ian Balina, regarding an alleged unregistered securities offering (the SEC considers any token offering to be a security).
So while we’re yet to indisputably see Gensler’s foot come down on Ethereum, perhaps that time is coming. Whether he wins the argument is another story.
Ripple versus SEC
Maybe the SEC is just in a huff because its legal actions against the US$20bn cryptocurrency Ripple (XRP) isn’t quite going their way.
Both parties are urging District Judge Analisa Torres to make a ruling in order to put the two-year wrangle to bed.
The SEC has yet to clinch the US$1.3bn lawsuit, with some pondering whether a deal has finally been carved out.
Ripple had already won big earlier this year, when Judge Sarah Netburn of the United States District Court ordered the SEC to release email documents to Ripple which the SEC had attempted to cloak under attorney-client privilege.
Ripple has soared ahead on the news, but as for ETH, it’s struggling to hold ground, having dropped over 20% in the past week.