On September 15, 2022, the Ethereum blockchain completed its long-planned transition from the Proof-of-Work (“PoW”) consensus algorithm to the Proof-of-Stake (“PoS”) consensus algorithm in an event known as the Merge. The shift, seven years in the making, was by all accounts seamless and marked a milestone in cryptocurrency history. Commentators heralded the Merge as proof that a prominent blockchain like Ethereum—the largest blockchain by number of software projects developed thereon, and the second largest by native token market capitalization—could operate on the relatively energy-efficient PoS consensus algorithm rather than the far more energy-intensive PoW consensus algorithm, on which Bitcoin still runs. However, while the Merge may have been beneficial for energy and hardware conservation, the shift in Ethereum’s protocol is already drawing legal scrutiny. In particular, this alert considers what influence the Merge, and subsequent developments, may have on the SEC’s and other plaintiffs’ views of whether Ethereum’s native token, Ether, or staking programs related to Ether, constitute securities under the agency’s jurisdiction.
Launched in 2015, Ethereum is an open-source blockchain operating on a worldwide network of volunteer-maintained computers called “nodes.” Ethereum allows software developers to write and implement decentralized applications (“dApps”)—computer programs existing on the blockchain that can operate autonomously in a decentralized fashion. dApps typically operate through the use of smart contracts—code that is akin to a regular contract between counterparties, but with the performance automatically implemented when given preconditions are satisfied.
Ethereum’s founders envisioned its smart-contract functionality would allow use-cases beyond the provision of an alternative currency. In 2017, for example, Ethereum became popularized by a wave of Initial Coin Offerings (“ICOs”) made with the network’s smart contract functionality. By 2022, the Ethereum ecosystem featured a vast array of increasingly familiar use-cases, such as decentralized finance (“DeFi”)—which has included collateralized lending and derivatives trading—and non-fungible tokens (“NFTs”)—which could represent ownership of an asset, such as digital artwork, or other contract or property rights. Anyone with access to the Ethereum network can use or create a smart contract to effectuate these or other use cases. In addition, other cryptocurrencies may be developed under a fungible token standard (ERC-20) to operate on the Ethereum network and leverage its smart contract functionality.
Proof of Work Versus Proof of Stake
When Ethereum was launched in July 2015, it operated on a PoW algorithm to achieve consensus on adding new blocks to the blockchain. Transacting on the Ethereum network requires a user to pay “gas” fees denominated in Ether. Under the PoW model, gas fees were paid to a subset of hardware- and energy-intensive nodes called “miners.” The miners’ job was to perform high-powered computing then prove complex mathematical work (known as hashes) to win the right to add valid blocks recording new transactions to the blockchain (for which they also received fees in Ether). In essence, miners demonstrated that they had capital invested in the Ethereum network by using expensive hardware and expending large amounts of energy, which, of course, has considerable costs.
Throughout Ethereum’s history, a community of active software developers and stakeholders have implemented changes and improvements in the network. These upgrades included changes to the network intended to increase scalability (i.e., transaction speed), security, decentralization, and sustainability, among other aims. Transitioning the network from the energy-intensive PoW model to the PoS model in what would be called the Merge was essential to these goals.
Unlike PoW, a PoS consensus protocol does not involve miners with powerful hardware performing complicated mathematical problems to add valid blocks to the blockchain. Instead, in PoS, “validator” nodes demonstrate that they have capital invested in the Ethereum network by “staking,” i.e. depositing, at least 32 Ether (currently worth over $50,000) into a smart contract on the blockchain. Holders of more than 32 Ether may choose to operate their own validator nodes, and holders of any amount of Ether may choose to delegate it to another validator, which may be associated with a centralized entity such as a cryptocurrency exchange platform. An algorithm on the blockchain randomly selects a validator (with chances of selection being proportionate to the amount of Ether each validator has staked) to add valid new blocks recording new transactions to the blockchain. Validators, rather than miners, then receive rewards in Ether for adding new blocks; these in turn may be paid to downstream stakers who have delegated their Ether to a given validator. This system is intended to incentivize buying, holding, and staking of Ether.
To effectuate Ethereum’s transition from PoW to PoS, Ethereum’s developers launched a parallel PoS Ethereum blockchain, called the Beacon Chain, in December 2020. The Beacon Chain functioned as a sort of test run for PoS and allowed staking of Ether, but did not process real Ethereum transactions. The “Merge” is so called because it would see the Beacon Chain merge with the primary Ethereum blockchain (still operating on PoW), with the merged blockchain utilizing PoS to process transactions. Ethereum’s developers seamlessly implemented the Merge on September 15, 2022, and Ethereum is now an entirely PoS blockchain. Accordingly, holders of Ether may stake those tokens and receive staking interest in exchange, as described above. However, it is not yet possible for stakers to withdraw their staked Ether or the interest that has accumulated on it. The upcoming “Shapella” upgrade, which is planned for April 12, 2023, is intended to allow stakers to withdraw their staked Ether.
According to proponents, transitioning Ethereum to PoS from PoW increased decentralization by facilitating less expensive validator nodes; increased security by raising the cost of so-called “51% attacks” and the community’s ability to respond to various attacks; increased transaction speeds by allowing future upgrades to data-processing distribution; and reduced energy consumption by approximately 99.95%.
Allegations To Date That Ether Or Ether Staking Programs May Be Securities
Given these ostensible benefits, onlookers tended to view the Merge as a positive event. But there has been at least one underappreciated collateral effect: new scrutiny from the SEC, state regulators, and private class action plaintiffs.
In recent years, regulators and private plaintiffs have increasingly argued that many crypto tokens and products are securities subject to the securities laws under the Supreme Court’s Howey test, articulated in SEC v. W.J. Howey Co. 328 U.S. 293, 298-99 (1946) or the Reves test, articulated in Reves v. Ernst & Young, 494 U.S. (1990). Under the Howey test, a crypto asset is an “investment contract,” and therefore a security subject to the securities laws, where: “a person  invests his money  in a common enterprise and  is led to expect profits  solely from the efforts of the promoter or a third party.” Id. Under the Reves test, a crypto-related program, such as an Ether staking program, is a security if it is a “note” and does not bear a “family resemblance” to one of a list of judicially determined exceptions.
SEC actions in this vein have been particularly notable. The SEC has succeeded in applying the Howey test to crypto assets in a number of recent cases involving crypto assets issued by or for use on communications and media platforms. In SEC v. Telegram Grp. Inc., 448 F. Supp. 3d 352 (S.D.N.Y. 2020), the Southern District of New York granted the SEC’s request for an injunction preventing the distribution of “Gram” tokens by Telegram Group Inc., finding that Telegram’s initial private sale and potential for public resale constituted a scheme to distribute unregistered securities. Then in SEC v. Kik Interactive Inc., 492 F. Supp. 3d 169 (S.D.N.Y. 2020), the same Court granted the SEC summary judgment, finding that the “Kin” tokens that Kik Interactive Inc. had offered and sold through a pre-sale and initial coin offering were securities. Similarly, in S.E.C. v. LBRY, Inc., Case No. 21-cv-260-PB, 2022 WL 16744741 (D.N.H. 2022), the District of New Hampshire granted the SEC summary judgment, determining that LBRY, a media platform, had violated the securities laws by offering and selling unregistered securities in the form of its “LBC” tokens.
The SEC has indicated that it will continue to bring enforcement efforts against players in the cryptocurrency space, as current SEC Chair Gary Gensler has emphasized on multiple occasions. And the agency appears to be increasing the creativity of its approach. In July of last year, the SEC announced charges against an employee of Coinbase Global, Inc. (“Coinbase”), his brother, and his friend, for alleged insider trading of nine crypto tokens listed on Coinbase’s trading platform, which the SEC alleged were securities under the securities laws. This was the first time the SEC brought an insider trading complaint relating to the cryptocurrency market. The complaint made the SEC’s criteria for determining when it considered tokens to be securities somewhat unclear, as it alleged that nine crypto tokens that the defendants allegedly shared insider information about and traded were securities, but not that sixteen other such crypto tokens at issue also constituted securities.
The SEC’s view of Ether has seemed more elusive, which has been notable given Ethereum’s prominence in the cryptocurrency market. In remarks delivered at the Yahoo Finance All Markets Summit in June 2018, then-Director of the SEC’s Division of Corporate Finance William Hinman considered Ether in light of the initial coin offerings that were popular at that time. Director Hinman stated that “based on [his] understanding of the present state of Ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions.” He added that “applying the disclosure regime of the federal securities laws to current transactions in Ether would seem to add little value” to the agency’s efforts, and suggested that “[o]ver time, there may be other sufficiently decentralized networks and systems where regulating the tokens or coins that function on them as securities may not be required.” Director Hinman therefore contrasted Ethereum’s more decentralized structure with those of “systems that rely on central actors whose efforts are a key to the success of the enterprise,” in which cases “application of the securities laws protects the investors who purchase the tokens or coins.” In sum, Director Hinman expressed that decentralization of a cryptocurrency network can be, at some point, sufficient to prevent a related crypto asset from being a security.
That theory appeared to govern the SEC’s view of Ether for some years. In a March 2019 letter, then-SEC Chair Jay Clayton (Chair Gensler’s immediate predecessor) agreed with “Director Hinman’s explanation of how a digital asset transaction may no longer represent an investment contract if, for example, purchasers would no longer reasonably expect a person or group to carry out the essential managerial or entrepreneurial efforts.” And the Commodities Futures Trading Commission (“CFTC”) has for years considered Ether to be a commodity subject to its regulatory jurisdiction. Consistent with these views, to date, the SEC has not alleged that Ether is a security.
But these winds may be changing following the Merge. After giving testimony to the United States Senate Banking Committee on September 15, 2022—the very day of Ethereum’s transition to Proof of Stake—current SEC Chair Gensler told reporters that a cryptocurrency network allowing its users to stake coins in return for staking rewards was “another indicia that under the Howey test, the investing public is anticipating profits based on the efforts of others.” Chair Gensler’s view ought to be considered in light of his belief, expressed in 2018, that Ether was relatively centralized in comparison to Bitcoin, which both he and his predecessor have suggested is not a security due to its high decentralization and lack of intermediaries. Thus, regardless of how centralized the Ethereum network actually is, the SEC may take the position that its relative centralization, along with the expectation of profits through the labor of others via staking rewards, are sufficient to satisfy the Howey test and render Ether a security. Interestingly, Chair Gensler did not appear to address the fact that a PoS-based network would tend to be more decentralized than a PoW-based network at least in one crucial sense: in PoS, a far greater number of investors can contribute “efforts” of validating new blocks by staking their tokens, whether or not they run their own validator nodes, whereas in PoW, a relatively small number of miners with high-powered computing rigs dominated the validation and addition of new blocks. Indeed, as of October 31, 2022, more than 14 million Ether had been staked on Ethereum, up 7.5% from the pre-Merge second quarter of the year. Currently, over 18 million Ether are staked, equating to nearly 15% of the supply of Ether.
Although Ether could be alleged to be both a security and a commodity, it is notable that the CFTC continues to believe that post-Merge Ether is a commodity subject to its jurisdiction. CFTC Chair Rostin Behnam stated exactly that in late October 2022, while contrasting his views with those of SEC Chair Gensler. FTX, the cryptocurrency platform operated by financier Samuel Bankman-Fried, collapsed in November 2022. Weeks later, in December 2022, the CFTC brought a complaint in the Southern District of New York against Bankman-Fried, his colleagues Caroline Ellison and Zixiao “Gary” Wang, and two entities they controlled, for commodities fraud related to the collapse. In that complaint, CFTC alleged that Ether and Bitcoin are “commodities in interstate commerce” and “‘commodities’ as defined under Section 1a(9) of the [Commodity Exchange] Act, 7 U.S.C. 1a(9).” While the CFTC did not refer to the Merge, it did allege that during the events leading to FTX’s collapse in mid-November 2022, approximately two months after the Merge, Ether continued to be a “digital asset commodit[y],” like Bitcoin. The CFTC also recently reiterated its view that Ether is a commodity in a complaint levied against cryptocurrency platform Binance.
The SEC certainly has begun to target the “staking” concept, at least in a broader sense. In February 2023, crypto exchange Kraken settled charges brought by the SEC alleging that it had failed to register the offer and sale of securities in the form of its staking-as-a-service (“SaaS”) program. In that program, investors would transfer their crypto assets to Kraken to be staked, in exchange for advertised investment returns. Kraken agreed to cease its SaaS program and to pay disgorgement and a penalty without admitting or denying the SEC’s allegations. The SEC’s complaint in the Kraken matter contains several nuances that avoid staking out a clear position on whether it considers Ether, under the PoS mechanism, to be a security. In particular, while the complaint outlines the PoS mechanism and the process of staking Ether and other assets on their respective blockchains, it differentiates that process from the Kraken SaaS program, which, it alleges, involved the aggregation of investors’ crypto assets, and staking of those pooled assets, as well as other activities by Kraken, to obtain a competitive advantage in the staking marketplace and offer investors outsized returns, among other benefits not available to typical stakers. The complaint clarifies that it was these features of the Kraken SaaS program, rather than the underlying smart-contract-based staking protocols per se, that the SEC alleged were an investment contract, and thus, an unregistered security. In other words, the complaint does not allege that Ether, or staked Ether, is itself a security.
Mere weeks later, in March 2023, the New York Attorney General’s Office (“NYAG”) alleged in State v. MEK Global et al. that Ether was a security under New York and federal securities law and that KuCoin, a cryptocurrency exchange that deals in Ether, unlawfully failed to register as a securities dealer. The NYAG appeared to allege that Ether has been a security since its inception, years prior to the Merge. Interestingly, however, the NYAG also alleged that the Merge increased investors’ expectations of profit from Ether, and thus Ether’s likelihood of being a security, because “[t]he shift to proof-of-stake significantly impacted the core functionality and incentives for owning ETH, because ETH holders now can profit merely by participating in staking.”
Only days after the KuCoin filing, SEC Chair Gensler reiterated his view that crypto tokens operating on the PoS consensus mechanism are likely to be securities. When asked for his reaction to CFTC Chair Behnam’s view that Ether is a commodity following a Commission vote, Chair Gensler asserted that “[t]he investing public is investing anticipating a return, anticipating something on these tokens, whether they’re proof-of-stake tokens, where they’re also looking to get returns on those proof-of-stake tokens and getting 2%, 4%, 18% returns.” He added: “I would just suggest that each of these token operators . . . seek to come into compliance, and the same with the intermediaries.”
While the Merge may have brought considerable benefits to the Ethereum network, it may also have drawn new scrutiny from private plaintiffs and regulators including the SEC, which until recently suggested that Ether was not under the agency’s jurisdiction. We cannot predict what litigation will be filed next, but it is sure to test the cryptocurrency and other markets’ views of the benefits of Proof of Stake.
If you have any questions about the issues addressed in this memorandum, or if you would like a copy of any of the materials mentioned in it, please do not hesitate to reach out to:
Phone: + 650-801-5122
Phone: +1 202-538-8141
Sarah Heaton Concannon
Phone: +1 202 538 8122
Phone: +1 213-443-3669
Phone: +1 617 712 7129
Phone: +1 212 849 7391
 See Ethereum.org, “The Merge,” https://ethereum.org/en/upgrades/merge/. Ethereum.org is a website funded in part by the Ethereum Foundation, which describes itself a non-profit organization dedicated to supporting Ethereum. See Ethereum Foundation, https://ethereum.foundation/.
 See Ethereum.org, “Nodes and Clients,” https://ethereum.org/en/developers/docs/nodes-and-clients/.
 See Ethereum.org, dApps, https://ethereum.org/en/dapps/; see also Frankenfield, J., Brown, J. & Logan, M., “Decentralized Applications (dApps): Definition, Uses, Pros, & Cons” (Mar. 19, 2022), https://www.investopedia.com/terms/d/decentralized-applications-dapps.asp.
 See Ethereum.org, “Introduction to Smart Contracts,” https://ethereum.org/en/developers/docs/smart-contracts/; see also Frankenfield, J., Rasure, E., & Kvilhaug, S., “What Are Smart Contracts on the Blockchain and How They Work” (Mar. 24, 2022), https://www.investopedia.com/terms/s/smart-contracts.asp.
 Ethereum was founded by at least eight cofounders, including Vitalik Buterin, who remains active in its development. See Adriana Hamacher, “Who are Ethereum’s co-founders and where are they now?” (July 28, 2020), https://decrypt.co/36641/who-are-ethereums-co-founders-and-where-are-they-now.
 See, e.g., Vitalik Buterin, “Bootstrapping A Decentralized Autonomous Corporation: Part I” (Dec. 31, 2013), https://blog.ethereum.org/2013/12/31/bootstrapping-a-decentralized-autonomous-corporation-part-i.
 See, e.g., Massey, R., Dalal, D. & Dakshinamoorthy, A., “Initial coin offering: A new paradigm,” https://www2.deloitte.com/us/en/pages/consulting/articles/initial-coin-offering-a-new-paradigm.html; Olga Kharif, “Initial Coin Offerings Surpass $4 billion despite SEC Warnings” (Dec. 13, 2017), https://blog.ethereum.org/2013/12/31/bootstrapping-a-decentralized-autonomous-corporation-part-i.
 See Sharma, R., Chavarria, A., & Ma, J., “What is Decentralized Finance (DeFi) and How Does it Work?” (Sept. 21, 2022), https://www.investopedia.com/decentralized-finance-defi-5113835. This firm has discussed certain legal implications of DeFi. See Quinn Emanuel, “Noted with Interest: DeFi and Potential Lender Liability” (Oct. 7, 2021), https://www.quinnemanuel.com/the-firm/publications/october-2021-noted-with-interest-defi-and-potential-lender-liability/.
 See Conti, R., Schmidt, J., “What is an NFT? Non-Fungible Tokens Explained” (Apr. 8, 2022), https://www.forbes.com/advisor/investing/cryptocurrency/nft-non-fungible-token/.
 See Ethereum.org, “ERC-20 Token Standard,” https://ethereum.org/en/developers/docs/standards/tokens/erc-20/.
 See Ethereum.org, “Proof-of-Work (PoW),” https://ethereum.org/en/developers/docs/consensus-mechanisms/pow/; see also Frankenfield, J., Anderson, S., “What is Proof of Work (PoW) in Blockchain?” (May 2, 2022), https://www.investopedia.com/terms/p/proof-work.asp. The consensus algorithm a blockchain uses—here, PoW or PoS—is concerned with adding valid blocks recording new transactions to the blockchain, i.e., achieving consensus, rather than processing new transactions, which is performed by full blockchain nodes that provide data to nodes performing consensus.
 See Ethereum.org, “What is Ether (ETH)?” https://ethereum.org/en/eth/. Ether is the crypto token that factors into Ethereum’s market capitalization. See, e.g., CoinGecko, “Ethereum (ETH),” https://www.coingecko.com/en/coins/ethereum.
 Transaction “base fees” were paid to miners until Ethereum Improvement Proposal (“EIP”) 1559 was implemented in August 2021, after which such fees were “burned” and removed from circulation. See Ethereum.Org, “EIP-1559,” https://eips.ethereum.org/EIPS/eip-1559.
 See id.; see also Ethereum.org, “The Merge,” https://ethereum.org/en/upgrades/merge/; Duggan, W., Adams, M., “What Is Ethereum 2.0? Understanding The Ethereum Merge” (Sept. 15, 2022), https://www.forbes.com/advisor/investing/cryptocurrency/what-is-ethereum-2-merge/.
 See Ethereum.org, “Proof-of-Stake (PoS),” https://ethereum.org/en/developers/docs/consensus-mechanisms/pos/; see also Reuters, “Explainer: Understanding Ethereum’s Major ‘Proof of Stake’ Upgrade” (Sept. 9, 2022), https://www.nbcnews.com/tech/crypto/explainer-understanding-ethereums-major-proof-stake-upgrade-rcna46998.
 “Shapella” is a portmanteau of “Shanghai” and “Capella,” which were the names for related upgrades to Ethereum’s execution and consensus layers, respectively. See, e.g., Protocol Support Team, “Goerli Shapella Announcement” (Mar. 8, 2023), https://blog.ethereum.org/2023/03/08/goerli-shapella-announcement; Ethereum.Org, “The Merge,” https://ethereum.org/en/upgrades/merge/ (describing the Shanghai upgrade).
 A 51%-attacker would need to acquire control of 51% of all staked ether in order to take over the network—an extraordinarily expensive goal. See Frankenfield, J., Rasure, E., & Kvilhaug, S., “51% Attack: Definition, Who Is At Risk, Example, and Cost” (Sept. 28, 2022), https://www.investopedia.com/terms/1/51-attack.asp.
Specifically, the transition allowed for “sharding”—i.e., running sidechains running in parallel to the main blockchain—that can share network data-processing load and reduce latency. See Ethereum.org, “Sharding,” https://ethereum.org/en/upgrades/sharding/; see also Carl Beekhuizen, “Validated, staking on eth2: #3 – Sharding Consensus” (Mar. 27, 2020), https://blog.ethereum.org/2020/03/27/sharding-consensus; Frankenfield, J., Rasure, E., & Perez, Y., “Sharding” (Nov. 21, 2021), https://www.investopedia.com/terms/s/sharding.asp. Notably, though, PoW blockchains have also allowed sharding.
 See Brodkin, J., “Ethereum completes the ‘Merge,’ which ends mining and cuts energy use by 99.95%” (Sept. 15, 2022), https://arstechnica.com/tech-policy/2022/09/ethereum-completes-the-merge-which-ends-mining-and-cuts-energy-use-by-99-95/.
 This firm has discussed the SEC’s increasing trend of enforcement on crypto assets. See, e.g., Quinn Emanuel, “Review of 2021 Trends in SEC Crypto Enforcement Actions“ (Feb. 3, 2022), https://www.quinnemanuel.com/the-firm/publications/review-of-2021-trends-in-sec-crypto-enforcement-actions/.
 See, e.g., SEC Chair Gary Gensler, “Testimony before the Subcommittee on Financial Services and General Government, U.S. House Appropriations Committee” (May 26, 2021), available at https://www.sec.gov/news/testimony/gensler-2021-05-26; SEC Chair Gary Gensler, “Prepared Remarks of Gary Gensler at the American Bar Association” (July 21, 2021), available at https://www.sec.gov/news/speech/gensler-remarks-aba-derivatives-futures-law-committee-virtual-mid-year-program-072121; SEC Chair Gary Gensler, “Remarks Before the Aspen Security Forum” (Aug. 3, 2022), available at https://www.sec.gov/news/public-statement/gensler-aspen-security-forum-2021-08-03; SEC Chair Gary Gensler, “Prepared Remarks At the Securities Enforcement Forum” (Nov. 4, 2021), available at https://www.sec.gov/news/speech/gensler-securities-enforcement-forum-20211104.
 See SEC, “SEC Charges Former Coinbase Manager, Two Others in Crypto Asset Insider Trading Action” (July 21, 2022), available at https://www.sec.gov/news/press-release/2022-127; Complaint, SEC v. Wahi, et al., Case No. 2:22-cv-01009, Dkt. 1, available at https://www.sec.gov/litigation/complaints/2022/comp-pr2022-127.pdf. This firm has discussed this proceeding previously. See Quinn Emanuel, “Crypto Litigation and Regulation Reporter: September 2022” (Sept. 2, 2022), available at https://www.quinnemanuel.com/the-firm/publications/crypto-litigation-and-regulation-reporter-september-2022/.
 Interestingly, the United States Attorney for the Southern District of New York in parallel indicted the same three defendants with wire fraud conspiracy and wire fraud in connection with the alleged insider trading scheme, but did not allege that any of the crypto tokens were securities. See U.S. Department of Justice, “Three Charged In First Ever Cryptocurrency Insider Trading Tipping Scheme” (July 21, 2022), available at https://www.justice.gov/usao-sdny/pr/three-charged-first-ever-cryptocurrency-insider-trading-tipping-scheme.
 SEC Director William Hinman, “Digital Asset Transactions: When Howey Met Gary (Plastic)” (June 14, 2018), available at https://www.sec.gov/news/speech/speech-hinman-061418.
SEC Chair Jay Clayton, Letter to the Honorable Ted Budd (Mar. 7, 2019), available at https://web.archive.org/web/20190325140830/https://www.coincenter.org/files/2019-03/clayton-token-response.pdf; see also Nikhilesh De, “SEC Chair Clayton Affirms Agency’s Stance Ether Is No Longer a Security” (Mar. 12, 2019), https://www.coindesk.com/markets/2019/03/12/sec-chair-clayton-affirms-agencys-stance-ether-is-no-longer-a-security/.
 See William Foxley, “CFTC Chairman Confirms Ether Cryptocurrency Is a Commodity” (Oct. 10, 2019), https://www.coindesk.com/markets/2019/10/10/cftc-chairman-confirms-ether-cryptocurrency-is-a-commodity/; Parth Dubey, “CFTC Chair Calls Ether A Commodity Despite PoS Transition” (Oct. 25, 2022), https://www.ibtimes.com/cftc-chair-calls-ether-commodity-despite-pos-transition-3628122.
 In that testimony, Chair Gensler stated that “Of the nearly 10,000 tokens in the crypto market, I believe the vast majority are securities. Offers and sales of these crypto security tokens are covered by the securities laws.” SEC Chair Gary Gensler, “Oral Testimony of Gary Gensler Before the United States Senate Committee on Banking, Housing, and Urban Affairs” (Sept. 15, 2022), available at https://www.sec.gov/news/testimony/gensler-oral-testimony-09152022.
 Kiernan, P., Ge Huang, V., “Ether’s New ‘Staking’ Model Could Draw SEC Attention” (Sept. 15, 2022), https://www.wsj.com/articles/ethers-new-staking-model-could-draw-sec-attention-11663266224.
 See Gensler, G., Lessig, L., “Session 6: Smart Contracts and dApps” (Fall 2018), https://ocw.mit.edu/courses/15-s12-blockchain-and-money-fall-2018/resources/session-6-smart-contracts-and-dapps/; House Appropriations Financial Services and General Government Subcomittee Hearing, “FY23 Budget Request for Federal Trade Commission & Securities & Exchange Commission” (May 18, 2022), https://www.youtube.com/watch?v=ANkpX_GoQZw (Chair Gensler suggesting that Bitcoin is “maybe . . . a commodity token.”); Andrew Ackerman, “SEC’s Gensler Signals Support for Commodities Regulator Having Bitcoin Oversight” (Sept. 8, 2022), https://www.wsj.com/articles/secs-gensler-supports-commodities-regulator-having-bitcoin-oversight-11662641115/; Lydia Beyoud, “SEC Chair Gensler Raises Concerns Over ‘Staking’ Model on Ethereum” (Sept. 15, 2022), https://www.bloomberg.com/news/articles/2022-09-15/gensler-raises-concerns-over-staking-model-used-on-ethereum?leadSource=uverify%20wall.
 See Jocelyn Yang, “Surging Popularity of Ethereum Staking Keeps Lid on Yields” (Oct. 31, 2022), https://www.coindesk.com/markets/2022/10/31/surging-popularity-of-ethereum-staking-keeps-lid-on-yields/.
 Parth Dubey, “CFTC Chair Calls Ether A Commodity Despite PoS Transition” (Oct. 25, 2022), https://www.ibtimes.com/cftc-chair-calls-ether-commodity-despite-pos-transition-3628122.
 Amended Complaint, Commodity Futures Trading Commission v. Samuel Bankman-Fried et al., Case No. 1:22-cv-10503, Dkt. 13 ¶¶ 5, 23, available at https://www.cftc.gov/media/8021/enfftxtradingcomplaint122122/download; see also U.S. Commodity Futures Trading Commission, “CFTC Charges Alameda CEO and Alameda and FTX Co-Founder with Fraud in Action Against Sam Bankman-Fried and his Companies Complaint” (Dec. 21, 2022) available at https://www.cftc.gov/PressRoom/PressReleases/8644-22.
 Amended Complaint, Commodity Futures Trading Commission v. Samuel Bankman-Fried et al., Case No. 1:22-cv-10503 (S.D.N.Y.), Dkt. 13 ¶ 116, available at https://www.cftc.gov/media/8021/enfftxtradingcomplaint122122/download.
 Complaint, Commodity Futures Trading Commission v. Changpeng Zhao et al., Case No. 1:23-cv-01887, Dkt. 1 ¶ 2, available at https://www.cftc.gov/media/8351/%20enfbinancecomplaint032723/download.
 See U.S. Securities and Exchange Commission, “Kraken to Discontinue Unregistered Offer and Sale of Crypto Asset Staking-As-A-Service Program and Pay $30 Million to Settle SEC Charges” (Feb. 9, 2023), available at https://www.sec.gov/news/press-release/2023-25.
 See U.S. Securities and Exchange Commission, “Kraken to Discontinue Unregistered Offer and Sale of Crypto Asset Staking-As-A-Service Program and Pay $30 Million to Settle SEC Charges” (Feb. 9, 2023), available at https://www.sec.gov/news/press-release/2023-25.
 Complaint, U.S. Securities and Exchange Commission v. Payward Ventures, Inc. (D/B/A Kraken) and Payward Trading, Ltd. (D/B/A/ Kraken), Case No. 1:23-cv-00588 (N.D.C.A.), Dkt. 1, available at https://www.sec.gov/litigation/complaints/2023/comp-pr2023-25.pdf.
 See id. ¶¶ 2, 31-26.
 See id. ¶¶ 3-4, 37-82.
 See id. ¶¶ 83-85.
 See Complaint, The State of New York v. MEK Global Ltd. et al., Index No. 450703/2023 (N.Y. Sup. Ct. N.Y. Cnty.), NYSCEF No. 1 ¶¶ 28-77.
 Id. ¶¶ 38-40, 49.
 Id. ¶ 42.
 See Colin Willhelm, “Gensler suggests proof-of-stake tokens are securities” (Mar. 15, 2022), https://www.theblock.co/post/220297/gensler-suggests-proof-of-stake-tokens-are-securities.