Coinbase CLO Exposes the SEC’s Drama Over Ethereum 2.0 Investigation

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Hold on to your hats, folks, because Coinbase’s CLO, Paul Grewal, just dropped some new intel about the SEC’s ongoing investigation into Ethereum 2.0. Yes, you heard that right. The SEC is still tangled up in figuring out if Ethereum’s shiny new upgrade should be labeled as a “security.” And no, they don’t have a concrete answer yet.

These juicy details come courtesy of a Freedom of Information Act (FOIA) lawsuit that Coinbase is running against the SEC. The big reveal? The SEC’s internal documents show their top minds debating whether ETH 2.0 should wear the “security” badge, which, you know, would lead to a *whole* new set of regulations. Dramatic, right? 🙄

SEC’s Internal Drama: Should Ethereum 2.0 Be a Security?

According to Grewal, these documents, which are part of the SEC’s “Vaughn index” (sounds fancy, huh?), give us a peek into the Commission’s long-winded discussions about whether Ethereum 2.0 is, in fact, a security. Spoiler: The SEC is still not sure.

There’s even a May 2022 article where the SEC gets all serious about the Howey test—yep, that old chestnut—to see if Ethereum 2.0 passes as a security. Because obviously, Ethereum 2.0 just isn’t *complicated* enough already. 😬

But wait, it gets even more confusing. In February 2023, the SEC’s internal email chain titled “RE Is Ethereum a Security?” kept the debate alive. And guess what? Even after Ethereum went full proof-of-stake (you know, all that “green” blockchain stuff), the SEC was still like, “Eh, we’re not sure yet.” So, yeah, pretty much the SEC in a nutshell.

Here’s the SEC’s Wild Ride Timeline

Let’s break this down for you, because the SEC sure didn’t. According to Grewal, the investigation kicked off after Ethereum shifted from proof-of-work to proof-of-stake. This major upgrade had the SEC questioning whether Ethereum 2.0 could meet the criteria of a “security.” You know, because everything is up for debate in the wild west of crypto regulation. 🙄

In April 2023, the SEC cooked up a memo (nothing says “we’re serious” like a memo) to help guide their decision-making on ETH 2.0. That document was supposed to reveal how the SEC might approach Ethereum’s regulatory future. Spoiler alert: it didn’t clear anything up. 📄

And as if that wasn’t enough, Grewal also pointed to emails from February and April 2024 where the SEC was still tossing around ideas about how to categorize Ethereum. So, yeah, they’re *totally* on top of things.

Coinbase Faces Off Against the SEC (Again)

Meanwhile, Coinbase has been feeling the heat from the SEC, especially under Chairman Gary Gensler’s watch. While the SEC dropped its lawsuit against Coinbase, things took a turn when Oregon decided to get involved. Yep, Oregon’s lawsuit claims Coinbase is breaking state securities laws by offering unregistered securities. Just what Coinbase needed: more legal drama. 🤦‍♂️

Grewal’s not pulling any punches, though. He’s calling for the SEC to release more documents that could explain why Ethereum 2.0 might pass some tests, like the “ecosystem” test, while other assets fail. Because, clearly, Coinbase wants to clear up just how confusing all this crypto regulation nonsense really is.

The SEC’s handling of Ethereum 2.0 is even messier when you remember the whole William Hinman fiasco. You know, the former SEC official who said in 2018 that Ethereum wasn’t a security? Yeah, that guy. Now, under acting chair Mark Uyeda and incoming SEC Chair Paul Atkins, the SEC is ending its “regulation by enforcement” approach. We’ll see if that means anything when it comes to real clarity on digital assets. Fingers crossed! 🤞

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2025-04-21 20:40