Are Solana and Polygon Safe Now That SEC’s Ethereum Investigation Is Over?

If the SEC is no longer investigating Ethereum, does that mean other similar cryptocurrencies are off the hook?The U.S. Securities and Exchange Commission on Tuesday informed Ethereum software company Consensys that it has This combined with the SEC’s approval of Ethereum ETFs for trading in the U.S. has been widely perceived as an admission by the Commission that Ethereum is not a security, which in turn could mean that other proof-of-stake coins like “I expect that the letter has little to no impact on the legal classification of other [proof-of-stake] coins,” Consensys sued the SEC earlier this year in a preemptive move after receiving a Wells Notice, which typically indicates the regulator intends to bring an enforcement action. (Disclosure: Consensys is one of 22 investors in Decrypt.) In its lawsuit, Consensys revealed the SEC has been operating under the assumption that Ethereum is an unregistered security for at least a year, partially because of the network’s switch to proof of stake.Proof of stake refers to a system in which cryptocurrency network users pledge their assets—Ethereum, which once operated much more like the energy-intensive Bitcoin blockchain, completed its transition to proof of stake in September 2022 after a years-long process. At the time, questions immediately arose as to whether staking could implicate federal securities laws in the United States. SEC Chair Gary Gensler said he believed The SEC has now apparently changed its view. But even if the Commission is no longer investigating Ethereum, it could proceed differently with other tokens, says Hinkes, according to the manner in which those specific assets were initially sold. The SEC may also consider factors like the state of the technology, the mechanics of its block validation, and more, according to the attorney. Matt Corva, a lawyer for Consensys, seemingly concurs, Not all companies can spend millions of dollars and thousands of hours dealing with an unlawful investigation – and they shouldn’t need to. We know Bitcoin is not a security and we know Ethereum is not a security. What about Polygon, or Solana, or any other coin?— Matt Corva (@MattCorva) June 19, 2024Other legal experts are similarly befuddled by the SEC’s opaqueness.“The SEC was very careful in the language it used in its letter,” crypto criminal defense lawyer While the end of the Ethereum investigation might not be a carte blanche for proof-of-stake coins, one expert believes it’s a good building block. Sebastian Heine