SEC closes investigation into Ethereum 2.0 after lawsuit

The SEC closed its investigation into Ethereum 2.0 after being sued by Consensys in April 2024 to defend Ethereum’s commodity status.

After declaring that Ether was not a security in 2018, the SEC changed its stance in 2023, claiming authority over Ether as a security and launching an unwarranted investigation into Ethereum. On April 25, 2024, Consensys filed a lawsuit against the SEC to protect the Ethereum ecosystem and sought a court order to stop the investigation on the grounds that ETH was a commodity and thus outside of the SEC’s regulatory jurisdiction.

Following this lawsuit, many policymakers – including members of Congress – and the public raised concerns about the SEC’s Ethereum 2.0 investigation. On June 7, 2024, Consensys asked the SEC to confirm that the May 2024 ETH ETF approvals, which were based on the fact that Ether is a commodity, would lead to the conclusion of the Ethereum 2.0 investigation.

Consensys calls for clear crypto regulations

The SEC’s Enforcement Division has now responded by informing Consensys that it is closing its investigation into Ethereum 2.0 and will not take any enforcement action against it.

While Consensys welcomed the SEC’s decision to drop the Ethereum investigation, it stressed that more needs to be done to protect the crypto industry in the U.S. The SEC needs to move away from its inconsistent and unclear approach to regulation through enforcement and instead provide clear guidelines for an industry that is critical to numerous technological advances. Consensys’ lawsuit also seeks a federal court ruling that its MetaMask Swaps and Staking services do not involve brokerage or securities issuance.

No company or individual should have to endure costly litigation to determine what is lawful. In their lawsuit, Consensys stated, “Our company is dedicated to developing software that enables global use and innovation on the Ethereum network. They should be able to operate without the cost, burden, and uncertainty of an unwarranted enforcement action.” This principle applies to the entire crypto sector. Consensys hopes this outcome signals the beginning of a new, clearer regulatory path.