Consensys Files Lawsuit Against SEC Over Ethereum Regulation
Consensys, a leading provider of web3 and blockchain software technology, has taken a bold step by filing a lawsuit against the Securities and Exchange Commission (SEC) and its five commissioners. The company is retaliating against what it describes as the federal regulator’s “illegal seizure of authority” over Ethereum.
In a tweet posted on April 25, 2024, Consensys announced the filing of the lawsuit, stating that the goal behind it is to ensure that Ethereum remains a vibrant and indispensable blockchain platform. The company aims to preserve access for the countless developers, market participants, and institutions that rely on the Ethereum network.
The complaint filed by Consensys outlines instances of what the company considers to be forceful and illegal overreach by the SEC in its attempts to regulate ether through ad hoc enforcement measures against Consensys and potentially other parties. Consensys is seeking a federal court declaration affirming that ETH (Ethereum) is not a security.
Additionally, the company argues that MetaMask, a popular Ethereum wallet program, is not considered a broker under federal law. Consensys asserts that its staking service complies with securities regulations and requests an injunction preventing the SEC from investigating or taking enforcement actions related to MetaMask’s Swaps or Staking functions.
Consensys disclosed that it received a Wells notice from the SEC on April 10, indicating the agency’s intention to pursue enforcement action against the company for alleged violations of securities laws through its MetaMask wallet program. The company refutes claims that it acts as a broker, stating that the wallet is simply an interface and does not hold customers’ digital assets or carry out transaction functions.
The lawsuit also highlights the SEC’s shifting stance on Ethereum, noting that the agency previously classified the cryptocurrency as a commodity rather than a security. Consensys argues that the SEC’s recent attempts to assert control over Ethereum would violate the Constitutional requirement of fair notice under the Due Process Clause.
The lawsuit emphasizes the potential harm that the SEC’s actions could cause to the Ethereum network and Consensys. Consensys cites the “major questions doctrine,” a Supreme Court decision that limits federal regulators from exceeding their Congressional responsibilities, as a foundational element of the lawsuit.
In hearings involving other cryptocurrency companies, judges have already rejected the notion that cryptocurrency falls under the SEC’s jurisdiction. Consensys’ lawsuit against the SEC marks a significant development in the ongoing debate over the regulation of blockchain technology and digital assets.
