SEC investigation into ETF 2.0 just ended, but lawyers are quarreling

Author: jk, Odaily Planet Daily On June 18, the U.S. Securities and Exchange Commission (SEC) announced that it had ended its investigation into Ethereum 2.0 and would not take enforcement measures against Consensys. This is undoubtedly a phased victory for Ethereum developers, technology providers, and the Ethereum ecosystem. A week has passed since the discussion on this matter, and many relevant people in the legal field have written detailed legal opinions on this matter. However, there are different opinions on the interpretation of this decision. Some lawyers believe that the end of this investigation means that all topics related to Ethereum as a security (except for staking) will no longer be investigated in the future, while other lawyers believe that this is just a temporary "truce" against Consensys. . This article will summarize the reactions of various parties, especially the different views of the legal community on this incident. Prior information summary: On June 18, the U.S. Securities and Exchange Commission (SEC) issued a notice of conclusion of its investigation into Consensys. The cause of this investigation comes from the previous case where Consensys took the SEC to court (if you want to know more details, you can refer to "ConsenSys sued the SEC backhand, which may affect the outcome of the approval of the Ethereum ETF"). Although the wording of this notice is somewhat inappropriate, Reluctant, but still expressed that it would investigate Ethereum 2.0 related content. Among them, the SEC itself used some ambiguous sentences: "Although we do not agree with the facts or legal conclusions stated in the June 4 letter in this notice, or in any other case, based on the information we have to date, "We do not intend to recommend to the Commission enforcement action against your client, Consensys Software Inc.," however, "this notification shall not be deemed to exonerate the party or ultimately result from the Staff's (concluded) investigation." Any indication of action.”

Original text of the notice issued by the US SEC. Source: SEC
On the day this incident occurred, Consensys immediately issued an article, labeling this incident a major victory. The article mentioned, “On June 7, we sent a letter to the SEC asking it to confirm that the May approval of an Ethereum ETF (based on Ethereum being a commodity) meant that the agency would end its Ethereum 2.0 investigation. Today, the SEC Enforcement Division informed us that they are closing their investigation into Ethereum 2.0 and will not take enforcement action against Consensys.” Consensys also insisted that the SEC must abandon its unprincipled and opaque enforcement regulations and instead work for the industry. Provide much-needed regulatory clarity.
What did the lawyer say? Consensys’ lawyers are aligned with the company. Laura Brookover, senior counsel and head of litigation and investigations at Consensys, expressed her views on the Twitter platform. She posted that the entire investigation (not just against Consensys) was closed. The letter states that no charges will be filed against Consensys, but the conclusion of the investigation means no charges will be filed against anyone. It covers all of Ethereum, so anyone who contributed code or bought or sold ETH is under investigation. Now, the entire investigation is over, not just for Consensys, but for everyone.
She also cited the SEC’s enforcement manual, “An investigation that has resulted in enforcement actions can only be closed after all enforcement actions are completed.” Therefore, the end of this investigation means that no enforcement actions have been filed against anyone.
Secondly, a very important thing is that yesterday, Laura Brookover and Sam Enzer, partner of Cahill Gordon & Reindel, attended an interview with the podcast media Unchained. The two shared a lot of content that was not mentioned on the Twitter platform. . They believe the letter represents some degree of division of opinion within the SEC:
“It suggests that enforcement officials have convinced Gensler that if they file an enforcement action alleging that merged Ethereum (ETH) was offered or sold as a security, They're going to fail and be embarrassed. I think Gary Gensler believes in his heart that ETH is a security, or that ETH is being offered and sold as a security because people deposit money there, right? Something of value and get rewarded. In his mind, that makes it a security, or he would very much like to have the power to regulate it, but I think his staff told him we were going to lose the case."
But. This statement has also attracted a lot of doubts, especially when the ETF has not yet been settled, and other exchanges and crypto institutions are still involved in lawsuits because of Ethereum. Enumma founder David Barrera posted that no part of the SEC's letter said the investigation was "closed." This decision simply means that the SEC will not prosecute others who offer or sell Ethereum, but according to the SEC’s Enforcement Manual, just because staff have concluded an investigation and decided not to prosecute one party does not mean that the investigation is “over.” , nor does it mean that lawsuits will not be brought against other parties. In other words, Uniswap or other institutions may still be involved in legal cases due to Ethereum.
David went further and said that the phrase "we disagree with... your factual statements and legal conclusions" is not common or standard language in such letters indicating that an investigation will not continue. In other words, the SEC only mentioned this sentence in the case against Consensys, which does not necessarily mean that it will completely abandon the lawsuit in the future.
Sam on the podcast also opined,
“The SEC has discretion in closing an investigation letter, right? Criminal prosecutors have prosecutorial discretion and regulatory enforcement agencies have regulatory enforcement discretion. When they deny a case, that’s Doesn't necessarily indicate that the action was legal or compliant with the law. It could be that the SEC doesn't have the resources this year or they have other more important things to deal with... but they are not bound to turn back. Unfortunately, the SEC changes its position quite often. "
At the same time, Laura expressed a point that the SEC's closure of the investigation has nothing to do with liquid staking and re-staking, that is another completely different thing:
"The SEC's actual investigation into those activities The above belongs to another independent investigation scope and is not part of the Ethereum 2.0 investigation. Therefore, the end of the Ethereum 2.0 investigation does not actually indicate the SEC’s views on liquid staking, heavy staking services, and collective staking.”
In ETFs. Will it have an impact on final approval and other litigation issues? For now, it is unlikely that ETF approval will be affected. Coindesk reported that SEC Chairman Gary Gensler told senators at the budget hearing on the 13th that final approval of the Ethereum ETF will be completed this summer.
In a budget defense hearing before a subcommittee of the Senate Appropriations Committee, Gensler said the process was "working smoothly" following initial approval of a group of ETFs. The agency had previously approved the preliminary application, but he said the final registration requirements — namely the submission of Form S-1 — are now being handled at the “staff level.”
As for other lawsuits, due to the slow progress of most legal cases, there is no update yet. Odaily will also continue to follow the reports.

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