Joseph Lubin rules out Ethereum being classified as a security in the United States

The second-largest cryptocurrency will not be classified as a security in the United States after moving to Proof-of-Stake. This view was expressed by ConsenSys founder and one of Ethereum’s co-founders, Joseph Lubin, in an interview with Cointelegraph.

“I think it is equally likely and would have the same impact as if Uber were outlawed. It would provoke a huge backlash not only from the crypto community but also from various politicians and certain regulators,” he explained.

In September 2022, Gary Gensler, head of the SEC, indicated that the possibility of staking a cryptocurrency could pass the Howey test, which is used to determine whether something is a security. The statement came after activation of The Merge update on the Ethereum mainnet.

According to Lubin, he “spent many years” participating in discussions with the SEC and the Commodity Futures Trading Commission. About five years ago regulators “were simply trying to understand what tokens are,” he added.

“Back then they thought that all [cryptocurrencies and tokens] fit the definition of a security. We, I think, helped them understand better that many tokens are not securities, and then they left, and now Gary [Gensler] and the team think that almost everything is a security,” Lubin noted.

However, the founder of ConsenSys emphasised that Ethereum remains “quite decentralised” and has “a range of use cases” that exclude designation as a security.

“There is no central set of promoters or developers who are deliberately trying to boost the price of ETH and enrich investors. In the United States there is a legal system that, I think, would support the arguments that will be advanced that this is not the case,” Lubin concluded.

In December 2020, SEC filed a lawsuit against Ripple, accusing the company of selling unregistered securities.

Later Fox Business published a wide-ranging investigation into the case. Journalists concluded that the people behind bringing the suit could have been affiliated with Ethereum.

Empower Oversight, a nonprofit, also pointed to a potential conflict of interest in the actions of former senior officials of the Commission.

Lawyers for Ripple for most of the proceedings tried to obtain internal SEC documents — the text of Hinman’s 2018 speech. He stated that for various reasons Bitcoin and Ethereum are not securities.

In late 2022, the commission filed a motion to seal certain documents in the Ripple case, including Hinman’s draft remarks.

In February 2023, the crypto exchange Kraken settled a dispute with the SEC, which found violations in its staking program.