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Empower Oversight Takes Legal Action Against SEC for FOIA Non-Compliance in ETHGate Controversy

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  • SEC sued by Empower Oversight for ETHGate document non-disclosure, alleging FOIA violation and demanding cryptocurrency regulation conflict transparency.
  • The SEC faces criticism for unclear cryptocurrency securities definitions, amidst regulatory challenges highlighted by inter-agency conflicts and significant court rulings.

A watchdog group called Empower Oversight filed a lawsuit against the US Securities and Exchange Commission (SEC) on the grounds that it violated the Freedom of Information Act (FOIA) in relation to the ETHGate scandal, as shared by Empower Oversight President, Tristan Leavitt on X.

The SEC’s previous ruling that Ethereum (ETH) was not a security is at the center of this dispute, which emphasizes the need for more transparency and accountability in the legal environment around cryptocurrencies.

SEC Cryptocurrency Regulation Under Scrutiny

The complaint challenges the SEC’s unwillingness to provide records that explain the thinking behind claims made by former SEC Chairman Jay Clayton and Director William Hinman that Ethereum would not be considered a security, which has also previously been highlighted in an ETHNews report.

These remarks have generated a great deal of discussion in the cryptocurrency community and questioned the SEC’s approach to regulating cryptocurrencies.

The SEC, led by Gary Gensler, is accused of breaking federal law by neglecting to respond to FOIA requests within the required 20 days. Empower Oversight’s Tristan Leavitt has blasted the SEC for taking so long to respond, viewing this as a purposeful roadblock to investigating possible conflicts of interest among SEC officials and cryptocurrency-related issues.

The lawsuit seeks to clarify if public servants follow moral guidelines and whether the SEC is committed to upholding transparency.

This lawsuit reflects the ongoing debate over whether bitcoins are securities. Despite the SEC’s Howey Test and investment contract theory, cryptocurrency regulation remains unclear.

This has fueled shareholder anger and resulted in prominent legal disputes, such as the Ripple v. SEC case. For a deeper dive into these developments, you can check out this YouTube video.

Inter-agency Conflicts and the Future of Crypto Custody 

CFTC Chairman Rostin Behnam’s remarks to Congress suggest that there may be inter-agency disagreements, which further complicates the matter.

Behnam drew attention to the possible contradiction arising from the SEC’s position on Ethereum as a security, specifically with regard to Prometheum, the only broker-dealer registered with the SEC that is responsible for holding Ethereum.

The Debt Box action against the SEC was particularly notable for Judge Robert J. Shelby’s ordering that the agency pay the defendants’ legal fees and admonish it for abusing its power. This verdict is expected to change the bitcoin industry.

Critics such as Coinbase’s CLO Paul Grewal and Ripple’s CLO Stuart Alderoty have voiced their worries, claiming that these legal decisions and regulatory obstacles demonstrate the urgent need for more uniform and transparent regulatory frameworks, as formerly reported by ETHNews.

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Syofri is an active forex and crypto trader who has been diligently writing the latest news related to the digital asset sector for the past six years. He enjoys maintaining a balance between investing, playing music, and observing how the world evolves. Business Email: info@ethnews.com Phone: +49 160 92211628