House's McHenry Accuses SEC Chief Gensler of Misleading Congress on Ethereum
The chairman of the House Financial Services Committee says Gensler refused to discuss his view on ETH in testimony even after the SEC was investigating it as a security.
Updated Apr 30, 2024, 9:42 p.m. Published Apr 30, 2024, 9:40 p.m.
U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler has been accused of misleading Congress by Rep. Patrick McHenry, the chairman of the House Financial Services Committee, who said Gensler's agency already knew it considered Ethereum's ether a security before he attended a hearing and declined to answer that question.
"Chair Gensler refused to answer questions regarding the SEC's classification of ether," McHenry said in a statement posted on X. "New court filings show this was an intentional attempt to misrepresent the commission's position."
The classification of (ETH), the second-largest cryptocurrency by market cap, is a major question hanging over the U.S. oversight of digital assets, and it's being fought on multiple legal fronts. If ETH is a security that should be registered and regulated by the SEC, then many other tokens may also fit that definition.
Documents in Consensys' newly filed lawsuit against the SEC describe how the agency was pursuing an investigation into the nature of ETH days before Gensler testified in April 2023. Consensys is suing the agency ahead of an expected SEC enforcement action.
Read More: SEC Chair Gensler Declines to Say if Ether Is a Security in Contentious Congressional Hearing
But McHenry's argument suggests that the agency's investigation equates with an actual policy position.
Spokespeople for the SEC didn't immediately respond to a request for comment on McHenry's accusations.
According to the SEC's investigations manual, an investigation "is appropriate and necessary to determine whether a violation of the federal securities laws may have occurred or may be occurring," crypto attorney Grant Gulovsen pointed out to CoinDesk. It's not a finding in itself, so the SEC may not have made a formal determination on how ETH should be categorized.
"I agree with Consensys that if the SEC determined all offers and sales of ETH involved securities transactions it would be devastating to the entire crypto industry, but since the SEC hasn’t actually done that yet, why try to force the issue?" Gulovsen said.
Read More: Consensys, a Target for the SEC’s Assault on ETH, Is Fighting Back
Jesse Hamilton
Jesse Hamilton is CoinDesk's deputy managing editor on the Global Policy and Regulation team, based in Washington, D.C. Before joining CoinDesk in 2022, he worked for more than a decade covering Wall Street regulation at Bloomberg News and Businessweek, writing about the early whisperings among federal agencies trying to decide what to do about crypto. He’s won several national honors in his reporting career, including from his time as a war correspondent in Iraq and as a police reporter for newspapers. Jesse is a graduate of Western Washington University, where he studied journalism and history. He has no crypto holdings.
