As the crypto market rebounds following Wednesday’s announcement by the Federal Reserve that it will keep interest rates as they are, Ethereum fans reflect on new updates that contemplate new updates that the Ethereum Foundation is being investigated by an unnamed “state authority.”

Moreover, the U.S. Securities and Exchange Commission (SEC) is reportedly waging a ruthless campaign to classify the Ethereum blockchain’s native token as a security, beginning a probe after Ethereum moved to a proof-of-stake network in 2022.

Classifying ETH as a security could complicate efforts to launch spot-based ether ETFs in the U.S. market.

SEC’s Securities Probe Into Ethereum

The Ethereum Foundation, a Swiss non-profit organization that works to support the blockchain behind the ether token, received a “voluntary inquiry from a state authority that included a requirement for confidentiality,” according to the organization’s GitHub repository.

Previously, the Ethereum Foundation’s website used to say:

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“The Ethereum Foundation (Stiftung Ethereum) has never been contacted by any agency anywhere in the world in a way which requires that contact not to be disclosed. Stiftung Ethereum will publicly disclose any sort of inquiry from government agencies that falls outside the scope of regular business operations.”

The footer message was removed in the Feb. 26, 2024 commit, along with the website’s warrant canary. Notably, the Ethereum Foundation didn’t name the “state authority” and the extent of the investigation is still unknown at publication time.

Meanwhile, several crypto-focused firms in the U.S. have received subpoenas from the Securities and Exchange Commission (SEC) in recent weeks demanding any records or financial documents related to their dealings with the Ethereum Foundation, per a Wednesday report by Fortune.

It’s unclear whether the SEC’s probe into the non-profit is connected to the “state authority” inquiry revealed on GitHub.

According to people familiar with the matter, the SEC lodged a campaign to label ETH as a security following the Ethereum network’s transition from the energy-guzzling proof-of-work to a proof-of-stake consensus mechanism in 2022.

Spot ETH ETF Hopes Dimmed

Since getting into office, SEC Chairman Gary Gensler has always dodged questions about whether ETH qualifies as a security under his agency’s purview, despite asserting Bitcoin, Ether, Litecoin, and Bitcoin Cash were “not securities” in 2018. The commission approved exchange-traded funds (ETFs) tied to Ether futures back in October but has yet to decide whether to greenlight or reject pending spot ETH ETF applications — with a decision expected in May.

Experts don’t think such a fund will get the regulatory nod by May, given the SEC’s lack of engagement with potential ETF providers and its latest attempts to classify the asset as a security.

The top Wall Street financial cop has repeatedly pushed back on approving ETH ETF applications from traditional finance giants like BlackRock and Fidelity, even after the landmark approval of spot Bitcoin ETFs in January.

The price of ETH remained unfazed by the news as it hit a $3,573 daily high, recording a 9.9% recovery from yesterday’s lows.