Consensys Sues SEC: Ethereum Regulation Battle, Ethereum developer Consensys has filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) in the District Court for the Northern District of Texas. The company wants to prevent the regulator from classifying ETH as a security.
Consensys Sues SEC Over Ethereum Classification
Consensys challenges the SEC’s recent actions, which suggest Ethereum could be classified as a security. In a surprising move, the SEC sent a Wells notice to Consensys on April 10th. This notice, a warning of potential legal action, alleges that MetaMask, Consensys’ popular crypto wallet, violates securities laws. Consensys strongly refutes these claims, emphasizing that MetaMask is simply an interface. They argue it doesn’t hold or manage customer assets or transactions, acting solely as a user-friendly bridge. The company contends that this categorization may compromise the long-standing belief that Ethereum is a commodity rather than a security.
The lawsuit also cites a 2018 speech by Bill Hinman, a former director of the SEC, where he stated that Ethereum was treated like a commodity. To further complicate matters, the Commodities Futures Trading Commission (CFTC), which regulates Ethereum-related derivative products, has classified cryptocurrencies as commodities.
Consensys argues the SEC’s recent actions violate due process rights. They claim the SEC significantly changed its position on Ethereum regulation, failing to provide adequate notice before taking action. This abrupt shift, according to Consensys, creates uncertainty and unfair treatment. The lawsuit claims that the Ethereum network and Consensys may collapse due to the SEC’s reversal.
Citing the “major questions doctrine,” a legal principle limiting agency power, Consensys argues the SEC oversteps its authority. Consensys cites Supreme Court decisions in cases like Terraform Labs and Coinbase. These cases involved dismissing crypto-related applications due to the SEC’s lack of clear jurisdiction. Consequently, Consensys seeks a court order barring the SEC from investigating or taking action against MetaMask’s swap features. Additionally, they request legal confirmation that staking and swap functions comply with securities laws.
The cryptocurrency industry opposes the SEC’s tightening grip.
Consensys’s lawsuit, nevertheless, is one of the few issues the cryptocurrency industry has had with the SEC. In addition, the SEC has brought legal action against other well-known exchanges like Kraken and Binance. The U.S. It should be emphasized that Uniswap Labs also reported that the company had been served with a Wells notice from the SEC.
The related legal action by Consensys and others filed by the Blockchain Association and Legit Exchange is classified as a class action case. These companies are working for the exact cause: regulating the breadth of jurisdiction of the SEC over particular crypto assets and companies. They describe their goal as a measure of defense against regulatory overreach that can suffocate the crypto sector, which is relatively new and fast-growing.
