The U.S. Securities and Exchange Commission (SEC) is actively exploring the possibility of classifying Ethereum (ETH) as a security. This development has attracted widespread attention and discussion because it may have a profound impact on the future development of the entire cryptocurrency industry, especially Ethereum.

According to recent reports, the SEC has issued multiple subpoenas to entities related to the Ethereum Foundation as part of its investigation into the foundation’s trading practices. These investigations have focused primarily on the Ethereum Foundation, a Swiss-based non-profit organization that plays a key role in the development and governance of the Ethereum blockchain [18]. Some companies received subpoenas shortly after Ethereum transitioned from a Proof-of-Work (PoW) model to a Proof-of-Stake (PoS) model [18].

This series of actions by the SEC is seen as a major blow to the cryptocurrency industry’s hopes of obtaining approval for an Ethereum ETF. According to reports, the SEC asked the company to provide documents and financial records related to the Ethereum Foundation’s transactions [20]. This investigation began in the wake of Ethereum’s transition to a “proof-of-stake” governance model in September 2022. The shift to proof-of-stake has given the SEC a new excuse to try to define Ethereum as a security [20].

In addition, SEC Chairman Gary Gensler has stated on multiple occasions that cryptocurrencies issued by blockchains that rely on proof-of-stake technology may be classified as securities [2]. Since taking over as SEC chairman in 2021, Gansler has been at the center of controversy for filing lawsuits large and small within the industry, particularly against some of the world's largest cryptocurrency exchanges such as Binance, Coinbase, and Kraken. Exchanges have been accused of selling unregistered securities, such as Solana’s SOL, Polygon’s MATIC, and Cardano’s ADA, among others[2].

If the SEC ultimately characterizes Ethereum as a security, it would have serious consequences for U.S. businesses and investors who already interact with or rely on Ethereum, including major exchanges that trade millions of dollars in Ethereum futures every day Such as CME Group and Cboe Global Exchange[2].

Overall, the SEC’s qualitative work on Ethereum is ongoing, and its results may have a significant impact on Ethereum as well as the entire cryptocurrency market.