Ethereum's latest software update may have caught the Securities and Exchange Commission (SEC) chair's attention to look into the second-largest cryptocurrency as a security, according to a report from the Wall Street Journal (WSJ).
Chair Gary Gensler shared his comments hours after Ethereum's successful update, known as The Merge, which shifted its framework from proof of work to proof of stake.
According to the report, Gensler spoke about the Howey test, which is a test used by courts to determine if an asset is a security. He stated that cryptocurrencies and intermediaries that allow holders to “stake” their coins might have to pass that test.
Howey test also examines whether investors expect to earn a return from the work of third parties, according to the WSJ.
"From the coin’s perspective…that’s another indicia that under the Howey test, the investing public is anticipating profits based on the efforts of others," Gensler told reporters after a congressional hearing.
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