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SEC drops investigation into Ethereum studio Consensys

Ethereum fans can breathe a sigh of relief. 

The US Securities and Exchange Commission (SEC) has formally dropped its investigation into the blockchain’s ecosystem.

Ethereum development studio Consensys shared the news on X overnight. 

“Today we’re happy to announce a major win for Ethereum developers, technology providers, and industry participants: the Enforcement Division of the SEC has notified us that it is closing its investigation into Ethereum 2.0,” the company posted.

“This means that the SEC will not bring charges alleging that sales of ETH are securities transactions.”

ETHEREUM SURVIVES THE SEC. Today we’re happy to announce a major win for Ethereum developers, technology providers, and industry participants: the Enforcement Division of the SEC has notified us that it is closing its investigation into Ethereum 2.0. This means that the SEC… — Consensys (@Consensys) June 19, 2024

Indications of an SEC probe into Ethereum and entities supporting the protocol circulated in March, when Fortune reported the agency was investigating three unnamed related companies for potential securities violations.

Consensys then sued the SEC one month later, alleging regulatory overreach. The suit claimed chairman Gary Gensler sought to grab power over the crypto space by using legal maneuvers to force ETH into a security definition following its switch to proof of stake in September 2022.

Part of those filings disclosed that Consensys had received a Wells notice from the SEC, indicating the agency’s intent to sue. The Fort Worth firm, which owns popular web3 infrastructure including crypto wallet MetaMask and API provider Infura, was founded by Ethereum co-founder Joe Lubin.

While the SEC probe was expected to be dropped following approval of a suite of spot ether ETFs last month, the formal notice puts to bed one of crypto’s primary existential threats, at least for now.

Former SEC chair Jay Clayton had initially backed SEC Director of Corporation Finance William Hinman’s notion that ether was no longer a security in 2019, as there was no central entity in control of the cryptocurrency at the time. No official statement had been given by the agency, however, and Gensler had seemingly been walking back those thoughts ever since.

On Wednesday morning, Alexander Grieve, government affairs lead at venture capital firm Paradigm, tweeted a copy of the SEC’s letter to Consensys. It reads:

“We write to provide notice that we have concluded the investigation in the [matter of Ethereum 2.0]…. 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.”

Here’s the official letter from the SEC to ConsenSys on ETH. They’re pretty hedge-y/evasive in their notification— BUT it is relatively unusual for the SEC to specifically highlight to a company that they’ve closed an investigation. They’re under no obligation to do so — Alexander Grieve (@AlexanderGrieve) June 19, 2024

The letter added that the notice was given under guidelines in the Securities Act which state that it “must in no way be construed as indicating that the party has been exonerated or that no action may ultimately result from the staff’s investigation.”

All good news for Consensys but other legal threats still loom over crypto. So far, there’s no word of the SEC’s Uniswap probe being dropped , although a lawsuit has not yet been filed.

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