SEC Investigates Crypto Firms Amid Ethereum Probe, Dampening ETF Hopes

By Jody McDonald March 21, 2024 In ETF, Ethereum, SEC
  • An Ethereum Foundation GitHub commit reveals the organisation is under investigation by an unnamed state authority.
  • A report from Fortune has also revealed that several US-based companies have been subpoenaed by the SEC, requiring them to provide all documents and financial records related to their dealings with the Ethereum Foundation to the regulator.
  • This investigation makes the approval of Ethereum spot ETFs in the US unlikely in the short-term and casts further doubt over the legal status of all proof-of-stake blockchains in the US.

The chances of Ethereum spot ETFs being approved in the US any time soon have taken a hit after revelations that the US Securities and Exchange Commission (SEC) is undertaking a large-scale investigation into the world’s second-largest cryptocurrency. 

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According to a report from Fortune, the goal of the SEC’s investigation is to have Ethereum classified as a security, which would see it regulated under US securities laws and complicate any future approval of Ether spot ETFs.

GitHub Commit Gives First Sign Of Investigation

The first sign that Ethereum was the target of some kind of investigation came from the title of a code commit on the GitHub repository for the Ethereum Foundation’s website, reported by CoinDesk yesterday. The Ethereum Foundation is a Swiss-based not-for-profit organisation whose mission is to support the development of Ethereum and related technologies.


The commit was titled “this commit removes a section of the footer as we have received a voluntary enquiry from a state authority that included a requirement for confidentiality”. 

The section of the website’s footer which was removed had previously included the statement:

The Ethereum Foundation (Stiftung Ethereum) has never been contacted by any agency anywhere in the world in a way which requires that contact not to be disclosed. Stiftung Ethereum will publicly disclose any sort of inquiry from government agencies that falls outside the scope of regular business operations.

Ethereum Foundation

The removed section also included a ‘warrant canary’—a small visual indicator that shows that an organisation has never been issued with a secret government subpoena. The removal of a warrant canary allows an organisation to communicate that it’s under secret subpoena without explicitly saying so.

More Organisations Linked To Ethereum Coming Under Scrutiny

Reporting by Fortune revealed that several unnamed US-based companies with links to Ethereum have also received subpoenas, claiming that the SEC “is waging an energetic legal campaign to classify Ethereum, the second-most popular cryptocurrency, as a security.”

According to Fortune, the subpoenas demand that all documents and financial records related to the companies’ dealings with the Ethereum Foundation be handed over to the SEC. One of the sources for Fortune’s report further claimed the investigation into the Ethereum Foundation began shortly after Ethereum switched from a proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS) consensus mechanism in late 2022.

In a worrying sign, all the sources who spoke to Fortune requested their identities be kept secret for fear of retaliation from SEC Chair Gary Gensler, with one source reportedly describing him as “vindictive”.

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This apparent push by the SEC to declare Ethereum a security makes the approval of Ethereum-based spot ETFs unlikely in the short term and casts a shadow over the wider crypto industry. If Ethereum is found to be a security it’s likely most other PoS networks will also be labelled securities and much of the industry could be subject to accusations of breaching federal securities laws.

Jody McDonald

Jody McDonald

Jody is a Brisbane-based freelance writer who specialises in writing about business, technology, and the future of work.

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