The SEC Ends Its Ethereum 2.0 Investigation, but Staking Isn’t in the Clear

The SEC won’t pursue enforcement against Ethereum 2.0, but why? How much of a role did politics play? And where does that leave staking and court cases involving companies such as Consensys and Coinbase?

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Last week, Consensys revealed that the SEC had concluded an investigation into Ethereum 2.0, referring to when Ethereum transitioned from a proof-of-work consensus mechanism to a proof-of-stake one.

In this episode, Laura Brookover, senior counsel & head of litigation and investigations at Consensys, and Sam Enzer, partner at Cahill Gordon & Reindel, explore the implications of this decision on Ether’s status as a commodity versus a security, and why the SEC dropped the pursuit, including whether the shifting political winds played a role. For instance, how much of the decision was influenced by the ETH ETF approvals, Democrats crossing party lines to vote for FIT21 and the repeal of SAB 121, and/or SEC crypto enforcement chief David Hirsch’s resignation?

In this discussion, they also explained why the closure doesn’t necessarily mean that staking, or restaking, is safe from the SEC. Plus, what’s the impact of this closure on the other big crypto cases, such as Coinbase, Kraken, Uniswap, and Ripple?

Show highlights:

• How Consensys managed to get the SEC to reveal that it had concluded its investigation into Ethereum 2.0, and the significance of that move
• The SEC’s possible reasoning behind investigating Ethereum after it had switched to proof of stake
• How uncommon is it for the SEC to send a letter concluding an investigation like the one into Ethereum
• Whether recent events around crypto as an election issue, the ETH ETF approvals, votes for FIT21 and the repeal of SAB121, and David Hirsch’s resignation, might be connected to the decision to close this investigation
• Whether the Biden administration has shifted its stance on crypto and whether Gensler should remain as chair
• How the SEC might still go after staking
• Whether restaking, such as pioneered by EigenLayer, is safe from regulatory actions
• Why the SEC might be pursuing different judgments in various jurisdictions for MetaMask and Coinbase Wallet
• What crucial evidence from the closed Ethereum 2.0 investigation could strengthen Coinbase’s defense in its ongoing lawsuit
• Why the SEC’s aggressive stance on various crypto enforcement actions seems to remain unchanged despite closing the Ethereum 2.0 investigation
• Why Sam and Laura believe Solana should not be considered a security, despite the SEC naming it as such in various crypto cases
• How the SEC’s argument about an “ecosystem” is nonsensical, according to Laura Brookover
• What the implications of the closed investigation are for the cases of Kraken and Ripple
• What Sam and Laura B. are watching out for in terms of regulation and ongoing legal cases

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Guests:

• Laura Brookover, Senior Counsel & Head of Litigation and Investigations at Consensys
• Sam Enzer, Partner at Cahill Gordon & Reindel
  • Previous appearances on Unchained:

Links

Ethereum ‘Survives the SEC’

Consensys lawsuit against the SEC

Ether ETFs

Latest on other SEC enforcement actions