Rep. Patrick McHenry, a staunch advocate for the crypto industry, joined the escalating warfare between U.S. financial regulators and the cryptocurrency sector on April 30, accusing Securities and Exchange Commission (SEC) Chairman Gary Gensler of having “knowingly misled Congress” on the commission’s position on Ethereum.
According to Patrick McHenry, the SEC already knew it deemed ether a security before Gensler attended a congressional hearing and dodged direct questions on whether Ether fell under the SEC’s or the Commodity Futures Trading Commission’s (CFTC) purview.
“Chair Gensler refused to answer questions regarding the SEC’s classification of ether,” House Financial Services Committee chairman McHenry said in a statement posted on X. “New court filings show this was an intentional attempt to misrepresent the commission’s position.”
#ICYMI: New court filings indicate that @SECGov Chair Gary Gensler knowingly misled Congress when pressed on the classification of #ETH at a @FinancialCmte hearing to conduct oversight of his agency.
Read my full statement
pic.twitter.com/8osMpbY6Iu
— Patrick McHenry (@PatrickMcHenry) April 30, 2024
The chairman’s comments follow the disclosure that the SEC has internally believed Ethereum (ETH) has been an unregistered security since 2023, as per unredacted sections of a lawsuit filed against the regulator by Ethereum software giant Consensys.
The lawsuit indicates that the SEC approved a formal order directing agency staff to issue subpoenas related to the offer and sale of ETH only five days before the hearing on April 13.
In McHenry’s view, the SEC’s probe equates with an actual policy stance. In his Tuesday statement, he further criticized the obvious disconnect between the agency’s public comments and private actions on Ethereum as a good example of the “arbitrary and capricious nature of the agency’s regulation by enforcement approach to digital assets.”
If the SEC is seeking to reclassify Ether as a security, it could have ramifications for greenlighting or denying spot ETH exchange-traded funds on U.S. exchanges. The SEC approved products tied to ether futures in October 2023, but many industry pundits doubt the regulator will approve any spot Ethereum investment vehicles come the May deadline. Insiders recently revealed that the SEC is preparing to deny the ether applications.
