New York AG Pushed SEC to Classify Ethereum as Security

In a significant development, the latest SEC internal files disclosed by Coinbase have revealed that during the 2023 lawsuit against the cryptocurrency exchange KuCoin by the New York Attorney General's Office, the office had formally requested the U.S. Securities and Exchange Commission (SEC) to recognize Ethereum as a security. This revelation sheds light on the ongoing debate surrounding the classification of cryptocurrencies and their regulatory status.

New York Investor Protection Bureau Director Shamiso Maswoswe explicitly requested in an email that the SEC submit an amicus brief supporting this position. Maswoswe argued that while this request was not a determinative factor in the case judgment, a court ruling that ETH is a security would be more beneficial for investor protection. This stance underscores the New York Attorney General's Office's commitment to safeguarding investors in the cryptocurrency market.

The SEC ultimately did not respond to the New York prosecutors' request, maintaining a vague stance on ETH's status. The files show that the SEC initially leaned towards classifying ETH as a commodity, but their position wavered after Ethereum shifted to a Proof of Stake (PoS) mechanism. This shift in the SEC's stance highlights the complexity and evolving nature of cryptocurrency regulation. The unique regulatory environment in New York, where the Department of Financial Services oversees both securities and commodities trading, adds another layer of complexity to the issue.

The appointment of cryptocurrency-friendly figure Paul Atkins to head the SEC under the Trump administration had eased the tense situation of U.S. crypto regulation to some extent. The SEC has recently issued statements clarifying that some digital assets do not fall into the category of securities. However, this exposed document once again highlights the fundamental disagreement between U.S. federal and state-level regulatory agencies on the issue of cryptocurrency classification. The ongoing debate and the lack of a clear regulatory framework continue to pose challenges for the cryptocurrency industry and its stakeholders.