William Timmons, a U.S. Republican representative, has formally requested the Securities and Exchange Commission (SEC) to disclose internal documents concerning its evolving stance on Ethereum (ETH). Timmons criticized the SEC's inconsistent and unclear classification of ETH as either a security or a commodity, describing the agency’s approach under Chair Gary Gensler as a "zigzagging approach" that has caused confusion and instability in the cryptocurrency market.
Timmons highlighted the contrast between the SEC’s 2018 position, articulated by former Director William Hinman, which stated that ETH was not a security, and the agency’s reluctance under Gensler in 2023 to clarify ETH’s status during congressional testimony. This inconsistency has adversely affected investors and blockchain businesses, according to the congressman.
The congressman’s letter requests key records, including internal memos labeled "ETH—Security or Not," emails involving Gensler, and documents related to an SEC probe into "ETH 2.0." Of particular concern was the SEC’s covert approval of an ETH 2.0 examination just days before Gensler’s congressional hearing in April 2023, while the agency later approved spot ETH exchange-traded funds (ETFs) in 2024, suggesting by implication ETH’s non-security status. The probe was abruptly closed soon after, further adding to market uncertainty.
Timmons argues that clear transparency from the SEC is vital for Congress to draft effective legislation and for the crypto ecosystem to regain investor confidence and support innovation. The question of whether ETH is a security or a commodity remains crucial as it would determine whether SEC or Commodity Futures Trading Commission (CFTC) oversight applies, impacting exchanges, ETF issuers, and decentralized finance projects.
The congressman’s request coincides with ongoing debates around the CLARITY Act, a bipartisan proposal aimed at formally defining digital assets and clarifying regulatory jurisdictions. Timmons also referenced internal SEC discussions revealed through a Freedom of Information Act request by Coinbase, which illuminated the agency's opaque decision-making process on ETH’s classification.
Overall, Timmons’ demand for disclosure intends to shed light on the SEC’s regulatory practices and promote a stable and transparent regulatory environment for Ethereum and the broader digital asset industry.