SEC vs ETH: Is Ethereum Foundation Next Target For US Regulator Amid ETF Push?

Written by

Joanna K


Published Apr 3, 2024 at 2:07 PM
Last updated Apr 3, 2024 at 3:05 PM

Is the United States Securities and Exchange Commission (SEC) looking to classify Ethereum as a security? 

That's the fear among the crypto community at present, with speculation running rife that either the Ethereum Foundation, the network or its ETH token could be next in line for a regulatory crackdown by the SEC.

The Ethereum Foundation is the Switzerland-based non-profit organization at the center of the ETH ecosystem, with Ethereum co-founder Vitalik Buterin serving on the executive board. 

Crypto canary in a coal mine

The latest buzz follow reports late last month that the SEC has allegedly requested data from firms linked with the Foundation.

On 26 February, the Foundation's website removed a warrant canary – as in canary in a coal mine – showing that it’s never been served a government subpoena. 

According to the group's GitHub code repository, the Foundation is facing a probe from an unnamed "state authority".

Ethereum web developer Pablo Pettinari wrote that they “received a voluntary enquiry from a state authority that included a requirement for confidentiality,” alongside a code commit withdrawing the canary. 

GitHub Ethereum Foundation

A 20 March report by Fortune followed the possible investigation and went directly to the US regulator for a comment request, who responded with “The SEC does not comment on the existence or nonexistence of a possible investigation."


The possible move comes at an important time for Ethereum and its ETH token as many US investment companies are hoping to offer spot ETH exchange-traded funds (ETFs) this year.

Heavy-hitting financial firms such as Fidelity and BlackRock have filed applications for spot ETH ETFs, with 23 May set as the deadline for a much-anticipated decision. 

But many crypto experts believe it won't be good news for investors.

Speaking about the current ETH ETF jitters, Eric Balchunas, senior ETF Analyst for Bloomberg, posted: "Re Eth ETF approval, we are holding the line at 25% odds altho tbh it is a very pessimistic 25%. The lack of engagement seems to be purposeful vs procrastination. No positive signs/intel anywhere you look. Personally hope they do approve it but it just ain't looking good."

Ethereum Foundation, network or token?

In response to the canary news, crypto lawyer Preston Byrne clarified that the information request does not confirm that the Foundation is the definite target of the probe. 

Posting on X (formerly Twitter) on 20 March, he stated: "There are many circumstances where the Foundation might receive process which is non-disclosable. That does not mean the Foundation is the target of those proceedings."

Byrne added: "Possible explanations for why the Eth Foundation might receive a subpoena, warrant or other process? A founder, a user, an employee, a counterparty might be under investigation. Without seeing the docs it's hard to tell, and even with the docs it can sometimes be hard to tell."

Meanwhile, Mike Selig of Willkie Farr & Gallagher law firm thinks it's no big deal. He stated: "It’s extremely common for crypto protocol foundations to receive voluntary requests for information from federal and state regulators. And subpoenas are about as sure as the sunrise for a crypto entity."

The security status of Ethereum has long been a complicated matter of debate for the US regulator.

At an SEC open meeting in March of last year, the regulator's chair Gary Gensler suggested that proof-of-stake (PoS) tokens such as ETH could be regulated as securities, although he did not specifically comment on Ethereum.

Speaking at the time, Gensler said: “I would suggest that each of these token operators, obviously consulting with the appropriate talent, seek to come into compliance."

ETH price

With less than two months to go before the approval deadline, time will shortly tell whether the SEC is investigating Ethereum for sure and to what extent.

At the time of writing, the price of ETH is trading at $3,311.51 – a fall of 7.48% in the past seven days, while 24-hour trading volume is down by 7.25%. 

Ethereum (ETH) seven day chart

The ETH token is the market's second-biggest crypto, with a market cap of $398billion.