Chair McHenry Accuses SEC Commissioner of Misleading Congress on Ethereum
Commentary by Steven Lofchie
House Financial Services Committee Chair Patrick McHenry accused SEC Commissioner Gary Gensler of misleading Congress regarding the classification of Ethereum ("ETH") as a security. Mr. McHenry said the SEC already knew it considered ETH a security before the Commissioner attended a hearing and declined to answer that question.
In a statement posted on X, Mr. McHenry said that "[j]ust months after a federal judge sanctioned SEC enforcement lawyers for lying to the court, new evidence shows Chair Gensler himself misled Congress." Mr. McHenry asserted that in testimony to the Financial Services Committee in April, Commissioner Gensler "refused to answer questions regarding the SEC's classification of Ether." He said classifying ETH as a security contradicts previous statements of the SEC. (See related coverage.) Mr. McHenry argued that this "episode underscores the urgency of Congress ... to provide a clear regulatory framework and robust consumer protections for digital asset markets."
Further, Mr. McHenry stated that "[n]ew court filings show this was an intentional attempt to misrepresent the Commission's position." Chair McHenry's statement comes after a blockchain software technology company sued the SEC to prevent it from declaring ETH a security. The company alleges that that in 2018, the SEC definitively declared that ETH is not a security. (See related coverage.)
Commentary
If the SEC is going to assert that Ethereum is a security, and do so by way of enforcement action rather than by a reasoned statement as to why the agency takes that view, it is impossible to describe the SEC's conduct as anything other than regulation by enforcement. The CFTC has taken the view for over four years that Ethereum is a commodity. (See, e.g., CFTC Chair Heath Tarbert Declares That Ethereum Is a Commodity). What has the SEC been doing these four years if it disagreed with the CFTC? This is not how regulators should work. (But see, SEC Enforcement Director Rejects "Regulation by Enforcement" Criticism.)
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