US House Republicans Appeal to SEC Chief Gensler Over ETH Security Case

By Ben Knight March 27, 2024 In Ethereum, SEC
  • The SEC has intensified its gaze on Ethereum, with many believing they may launch an all-out war against the token.
  • A series of House Republicans have spoken out against Gary Gensler, as a brokerage prepares to offer its clients Ethereum as a security.
  • The letter notes that several other regulatory bodies and legal cases have already deemed Ethereum to not be a security, and that the inconsistent messaging could be dangerous for the industry.
  • Meanwhile, the likelihood of a spot Ethereum ETF being accepted in May continues to fall.

When it comes to cryptocurrency, Gary Gensler loves the phrase “unregistered security”. It’s been the ammunition that’s fired lawsuit after lawsuit against prominent industry players like Kraken, Ripple and Coinbase. Now, the SEC is taking aim at the second-biggest digital currency in the world – Ethereum…but not without parliamentary opposition.

Related: Bernstein Says Tokenised BlackRock Fund Boosts Crypto Legitimacy

“Irreparable Consequences” as Prometheum Offers Eth as Security to Clients

According to financial newsletter Fortune, the Securities and Exchange Commission (SEC) is turning its attention to Ethereum with the intent of officially classifying it as a security. The report suggests that several companies offering Ether to clients have been summoned to court, specifically over their dealings with the nonprofit org the Ethereum Foundation. In particular, it appears the SEC isn’t pleased with the blockchain’s transition to a proof-of-stake network, which supposedly may constitute it as a… you guessed it – unregistered security.

To make matters worse, the SEC permitted Prometheum to provide custody of Ethereum to its institutional clients, therefore defining the digital asset as a security despite no official rulings on the matter. 


“Regulatory grey area” is one of the most common terms you hear whenever someone is discussing policing of the crypto industry. But this inconsistency starts at the top, and it’s not something that’s escaped the mind of higher-ups within the US Government.

House Republicans from the Agricultural and Financial services sectors have detailed their concerns in an open letter to Gary Gensler, noting that “agencies have an extensive public record identifying ETH as a non-security digital asset…There are multiple regulatory actions grounded in that position.”

Source: US House Committee on Agriculture

The letter goes on to suggest that if Prometheum’s launch is “allowed to proceed, [it] could have irreparable consequences for the digital asset markets”. 

Related: Analysts Downgrade Ethereum ETF Approval Odds Due to Lacklustre Engagement

Even competing financial bodies like the CTFC disagree with any suggestion that Ethereum is a security. But if we’ve learned one thing of the SEC, it’s that Gary and the crew will fight for (or against) whatever they deem necessary.

And so, the potential of a spot Ethereum ETF now hangs on a knife’s edge.

Ben Knight

Ben Knight

Ben Knight is a writer and editor from Melbourne with a passion for all things music and finance. He enjoys turning complex topics – especially the technical details of cryptocurrency – into digestible bites that anybody can understand. He acquired his Master’s in Writing, Editing and Publishing from RMIT in 2019 and has run his own creative writing business ever since.

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