US SEC is reportedly gearing up to classify Ethereum (ETH) as a security

• US SEC is reportedly investigating Ethereum Foundation, according to a report by Fortune
• A post on a similar investigation was made on the Ethereum Foundation GitHub in February 2024. 

Ethereum (ETH), the second largest cryptocurrency in the market, seems to have finally fallen under the radar of the US Securities and Exchanges Commission (SEC). According to a report by Fortune, SEC has started a “legal campaign” to classify ETH as a security. And, the infamous crypto regulator has served several subpoenas to several companies in relation to an investigation on Ethereum.

SEC reportedly probing Ethereum Foundation

Notably, the commission is seeking for any information and financial records on their relationship with Ethereum Foundation – the non-profit organization that spearheads the development and governance of the blockchain. Moreover, the investigation started right after Ethereum made a huge technical shift – changing its consensus mechanism Proof-of-Work (PoW) to Proof-of-Stake mechanism (PoS).

The development emerges hours after it was reported that a US state authority was investigating Ethereum Foundation, according to a Github commit. A February 26 commit by Pablo Pettinari, a front-end developer said, “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.” In addition to this, the commit also had deleted text that said

“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”

Investigation in parallel with Spot Ethereum ETF fate

Notably, the investigation seems to be taking momentum right when the market is expecting the commission to give a green card to a spot Ethereum ETF. The crypto community, particularly the Ethereum community, has been on high the end given that the first application came from Blackrock – the investment management giant.

The firm had filed for an spot ETH ETF right after it got an approval for its spot Bitcoin ETF earlier this year. And, this move was quickly mirrored by other players such as Fidelity, Hashdex, and ARK Invest. Notably, Fidelity is also looking into providing traders with the option of staking a part of their holdings.

However, with the ongoing investigation, it remains unknown how it would impact the applications. In today’s update, the SEC has delayed VanEck’s spot Ethereum ETF, a day after it delayed decision on Hashdex Nasdaq and ARK 21 Shares Ethereum ETF applications.