Ethereum Gains 3% in Wake of SEC Dropping Its ETH Investigation Without Charges

“But what about the ecosystem? What about the promotional statements? What about the efforts of others,” he wrote. “How do you explain both this decision and the other projects maligned by the SEC’s broken Howey analysis?”

The SEC has been using its so-called Howey Test for years to determine whether an asset meets the definition of a security and therefore needs to be registered with the SEC. But that’s drawn a ton of backlash from SEC Commission Hester Peirce, law professors, and lawmakers—all of whom argued it was an outdated and unfit test to apply to cryptocurrencies.

Things got even more daunting when SEC Chair Gary Gensler himself specifically flagged that proof of stake assets could qualify as securities under the Howey Test—right after the Ethereum merge.

That’s why the subject of the SEC’s investigation has been referred to as “Ethereum 2.0.” Ethereum became a proof-of-stake network after the merge in September 2022, which saw it transition from proof of work, like Bitcoin, to proof of stake consensus mechanism.

Since then, there’s been a running list of assets that have been named in lawsuits filed by the SEC accusing companies of trading in unregistered securities. Analysts have even suggested being a proof of work asset is what has kept some coins, like Litecoin (LTC) and Dogecoin (DOGE), out of the regulator’s crosshairs.

In April 2023, the charges filed against Bittrex alleged that OMG Network (OMG), Dash (DASH), Monolith (TKN), Naga (NGC), Real Estate Protocol (IHT), and Algorand (ALGO) were all securities.

A few months later, the SEC said in its lawsuit against crypto exchange Coinbase that a handful of assets were unregistered securities, including: Binance’s BNB token, the exchange’s now defunct stablecoin, BUSD, and 10 other tokens: Solana (SOL), Cardano (ADA), Polygon (MATIC), Filecoin (FIL), Cosmos Hub (ATOM), The Sandbox (SAND), Decentraland (MANA), Algorand (ALGO), Axie Infinity (AXS), and COTI (COTI).

The naming of coins in lawsuits—even before there had been a ruling on whether the allegations were true—was also enough for some of them to be delisted from crypto trading platforms.