Consensys alleges the SEC considered ether to be a security over a year ago

The U.S. Securities and Exchange Commission approved a "formal order" to investigate ethereum a year ago, Consensys Software Inc. alleged in a newly unredacted complaint on Monday.

The blockchain and web3 development company behind the well-known MetaMask Wallet said the regulator "already made what it knew would be a destabilizing reversal of its declaration that ETH was not a security" by early 2023.

"On March 28, 2023, Gurbir Grewal, Director of the Division of Enforcement, approved the Formal Order of Investigation in the matter of “Ethereum 2.0” (the 'Formal Order'), delegating to the SEC staff broader authority to investigate and subpoena individuals and entities involved in the buying or selling of ETH. The Commission affirmed the issuance of the Formal Order shortly thereafter on April 13, 2023," attorneys for Consensys wrote.

Formal orders are issued when the SEC's enforcement director believes it's needed to determine whether  "a violation of the federal securities laws may have occurred or may be occurring," according to the agency's enforcement manual. An order describes the nature of the investigation and designates certain staff members to subpoena witnesses, obtain documents among other tasks. All SEC investigations are done privately. 

The SEC declined to comment.

Consensys sued the SEC last week over its approach to regulating ethereum. Consensys says the SEC has decided ETH is a security and said the agency has "trained its sights" on the firm's Metamask software. The company also noted in the complaint that SEC staff sent Consensys a Wells notice earlier this month, meaning a formal notice that the agency plans to bring an enforcement action against them. Consensys says it has cooperated with the SEC and over the last year have sent over 88,000 pages as a result of being issued multiple subpoenas.

Is Ethereum a security or not? 

The question of whether the SEC has jurisdiction over Ethereum has come to the forefront over the past few weeks as reports have come out that the agency is subpoenaing companies that deal with the Ethereum Foundation. Consensys has argued that past SEC officials have said ethereum is not a security, pointing to a 2018 speech from the SEC's Director of the Division of Corporation Finance William Hinman. His speech, well-known in crypto circles, suggested that bitcoin and ether were not securities in his view.

SEC Chairman Gary Gensler has skirted the question of whether ether is a security. However, he has noted that many cryptocurrencies are and would fall under his agency's jurisdiction. Meanwhile, Commodity Futures Trading Commission Chair Rostin Behnam has said ether is a commodity.

Some questioned why the SEC believes ethereum is a security if it approved ether futures ETFs last year.

"Why did they approve eth futures ETFs then?" said Nate Geraci, president of The ETF Store said in a post on X on Monday. "Seems like that was implicit acceptance that eth = non-security commodity."

Updated at 5:20 p.m. ET to include SEC's decline to comment and details throughout