"It Never Was a Security": Ethereum Under The Regulatory Spotlight

In total, 31,000 BTC were raised by the Ethereum Foundation to fund the development of Ethereum - worth around $18.3 mln at the time.

If this is found to be the case, the Ethereum Foundation should have registered ETH as a security before the token sale was carried out.

"We spent a tremendous amount of time with lawyers in the US and in other countries, and are extremely comfortable that it is not a security; it never was a security many regulators that matter understand what Ethereum is."

In the case of Ethereum, Lubin is of the opinion that it is not a security for two reasons.

Secondly, the Ethereum Foundation refuted claims made by former CFTC chairman Gary Gensler last week, who said both Ethereum and Ripple should be considered as unregistered securities.

Ethereum Foundation head Aya Miyaguchi diffused any talk of the organisation's influence over the value of the cryptocurrency in a letter to the New York Times.

If the SEC chooses to label Ethereum as a security, the foundation will likely take the matter to the courts.

"However, the SEC is pragmatic. It would be a mistake, in my opinion, for the SEC to go after Ethereum for a couple of reasons. First, Ethereum is not a bad actor. There are plenty of fraudsters and con artists the SEC should be focusing on. Why focus SEC time and resources going after the good guys? Second, there are nuances in the way the Ethereum platform utilizes its tokens that may allow it to fail the Howey test. I don't think the SEC can risk losing an enforcement action of this magnitude at this stage."

If Ethereum is found to be a security, a number of things could happen.

In essence, if Ethereum is found to have violated SEC laws, the foundation, exchanges and other ICOs that were built on the Ethereum blockchain could face penalties at the very least.