The U.S. Securities and Exchange Commission (SEC) under current chair Gary Gensler has been investigating Ethereum’s status as a security since at least 2018, Fox Business reported.

A lawsuit, initiated by the blockchain software company Consensys, has brought to public attention the SEC’s Division of Enforcement’s formal investigation into “Ethereum 2.0” that began on March 28, 2023.

The agency’s approval of the investigation on April 13, 2023, granted the authority to issue subpoenas to individuals and entities involved with Ethereum transactions.

The SEC’s probe is centered on the possibility of unregistered offerings and sales of Ethereum dating back to at least 2018, marking a departure from the agency’s previous guidance under former Chairman Jay Clayton, which did not categorize Ethereum as a security.

The SEC’s alleged stance on Ether contrasts with the Commodity Futures Trading Commission’s (CFTC) previous classification of Ethereum as a commodity.

The preemptive legal challenge by Consensys contests the SEC’s right to determine Ethereum’s classification.

SEC Chair Gary Gensler has refrained from publicly confirming the agency’s position on Ethereum, even when faced with inquiries from the House Financial Services Committee.

The SEC’s scrutiny of Ethereum questions Ethereum’s legal standing and casts doubt on the future of Ethereum-based financial products, including the possibility of a spot Ether exchange-traded fund (ETF).

According to a report from Reuters last week, the SEC is expected to decline spot Ethereum ETF applications next month.

Total crypto market capitalization is down 3.1% to US$2.44 trillion at 3 p.m. ET, according to CoinGecko.

Ether fell nearly 5% to US$3,171 in the past 24 hours.