U.S. Representative Patrick McHenry has accused Securities and Exchange Commission (SEC) Chairman Gary Gensler of misleading Congress about the regulatory status of Ethereum.
The accusations come after a federal judge recently sanctioned SEC lawyers for dishonest court dealings, suggesting a troubling pattern within the agency.
Did Gary Gensler Mislead Congress About Ethereum?
In a meeting with the House Financial Services Committee, Gensler dodged direct questions about Ethereum’s security classification. Newly released court documents show this was an intentional move to obscure the commission’s position.
This deliberate ambiguity represents a sharp departure from earlier SEC communications, which consistently separated Ethereum from general security classifications.
The case intensifies scrutiny of the SEC’s regulatory strategy, particularly its approach to digital assets, under Gensler’s leadership.
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Representative McHenry criticized the SEC’s “arbitrary and capricious” enforcement methods and emphasized the need for legislative action. He advocated for the “21st Century FIT Act,” which aims to establish a comprehensive regulatory framework for cryptocurrencies to strengthen consumer protection.
“Classifying Ether as a security contradicts previous statements by the SEC and Chairman Gensler,” McHenry said. “This is another example of the arbitrary and capricious nature of agency regulation of enforcement approaches to digital assets.”
The controversy grew further when ConsenSys filed a lawsuit against the SEC. The lawsuit arose after the SEC issued a Wells Notice to Consensys as part of its “Ethereum 2.0” investigation.
The agency is focusing on Ethereum’s transition to a proof-of-stake consensus mechanism, which it claims can meet the Howey test criteria for security.
Consensys argues that the SEC’s current position conflicts with its previous declarations. In 2018, former SEC Director Bill Hinman publicly stated that Ethereum is not a security. However, the SEC now appears to be moving away from this stance, creating an atmosphere of uncertainty that jeopardizes the stability of the trillion-dollar cryptocurrency market.
Proof-of-stake or merge upgrades are actually bait from the SEC to say that Ethereum is a security. But I think that’s just a surface level point. Nothing about Proof of Stake itself and Proof of Work makes Ethereum secure. I think it’s just understanding the explanation to the SEC.” A Consensys spokesperson told BeInCrypto:
Read more: How to Buy Ethereum (ETH) and Everything You Need to Know
The outcome of this legal battle could have major implications for the cryptocurrency regulatory environment in the United States, impacting innovators and investors alike.
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