According to information from Fox Business producer Eleanor Terret, documents from a lawsuit filed by Consensys unveiled the SEC's belief that Ether was an unregistered security for at least a year. The cryptocurrency's compliance with federal regulations was a key factor in this perception, as revealed after Consensys received a Wells notice from the SEC indicating potential legal action.

In March 2023, the SEC's Division of Enforcement head, Gurbir Grewal, authorized a formal investigation named the Ethereum 2.0 probe to determine whether Ether should be classified as a security. This investigation allowed authorities to interview and investigate parties engaged in Ether trading.

Implications on Ether and ETFs

The uncertainty surrounding Ether's classification has significant consequences for the cryptocurrency market, particularly concerning the approval of financial products such as the spot Ether exchange-traded fund (ETF). Experts suggest that the SEC's ambiguity in defining Ether could lead to delays in deciding on such ETFs.

The developments in the Consensys lawsuit and the SEC's stance on Ether contrast with previous perspectives. Former SEC leaders viewed Ether and Bitcoin differently, with Ether not considered a security in June 2018.

As the SEC's investigation progresses, the cryptocurrency community closely monitors the situation, anticipating the impact on the overall market and future regulatory landscape for cryptocurrencies. The outcome of this investigation may establish crucial precedents for the treatment of other digital assets under U.S. legal frameworks.