In a recent social media skirmish, former Twitter CEO and Bitcoin advocate Jack Dorsey sparked a heated debate by affirming that Ethereum (ETH) could be considered a security.
The statement from Dorsey immediately drew attention and triggered a Twitter war with Udi Wertheimer, a Bitcoin Ordinals developer, criticizing Dorsey as a “clown.”
In response, Dorsey fired back, challenging Wertheimer to educate him by stating,
“ETH is not a security? Teach me, wizard.”
Wertheimer countered by sharing an old video of Gary Gensler, Chair of the US Securities Exchange Commission (SEC), affirming that ETH was adequately decentralized and not classified as a security.
Adding to the discourse, Gabor Gurbacs, strategy adviser to stablecoin issuer Tether and investment management firm VanEck, proposed that Ethereum’s recent transition to a proof-of-stake consensus mechanism might have triggered the reappraisal of securities laws.
This online confrontation unfolds against recent SEC lawsuits against cryptocurrency exchanges Binance and Coinbase. The regulatory body alleges that these platforms offered unregistered securities to their users.
The timing of this clash has drawn further attention to the issue of regulatory oversight in the crypto market.
Dorsey, further fueling the fire, endorsed a screenshot of a 2015 post by Coinbase CEO Brian Armstrong, in which Armstrong dismissed altcoins as a distraction and emphasized a focus on Bitcoin.
Dorsey continued his pro-Bitcoin stance by retweeting a video of Jack Mallers, CEO of Bitcoin Lightning application Strike, calling out Armstrong for prioritizing altcoins over the development of Bitcoin and the Lightning Network.
Interestingly, it is worth noting that during Dorsey’s tenure as the head of Twitter in 2021, the company sold 140 Ethereum-based nonfungible tokens (NFTs). Yet, Dorsey himself refrained from investing in ether at the time. In August 2021, he downplayed Ethereum’s potential to disrupt big tech, further emphasizing his preference for Bitcoin.
SEC’s evaluation of Ethereum’s regulatory status
Dorsey’s remarks and the ensuing controversy are critical when the SEC actively considers the classification of ethereum and other cryptocurrencies.
During a congressional hearing in early February, SEC Chair Gary Gensler acknowledged that tokens like Ethereum are often sold as investments, potentially falling under federal securities law. However, the SEC’s position remains unsettled. Gensler failed to clarify whether ETH should be regarded as a security or a commodity during a House Financial Services Committee hearing in mid-April.
While the SEC has initiated enforcement actions against companies that mint tokens on the Ethereum platform and has accused prominent influencers of promoting registered securities, an official statement on the classification of Ethereum is still pending.
The commission is carefully evaluating all relevant factors before making a final determination on the regulatory status of ETH, which could potentially impact the entire crypto industry.