Consensys Sues the SEC: Calls Its Authority over Ethereum “Unlawful”

Friday, 26/04/2024 | 05:01 GMT by Arnab Shome

The lawsuit seeks a court ruling that Ethereum is not a security and does not fall under the SEC’s authority.

The SEC sent a Wells Notice to Consensys earlier this month seeking clarification over MetaMask’s services.

The U.S. Securities and Exchange Commission Reuters

Consensys, a United States-based blockchain firm, has initiated legal action against the Securities and Exchange Commission (SEC) in a bid to deter the regulator from overseeing the Ethereum blockchain. Filed yesterday (Thursday), the lawsuit termed the efforts of the regulator a “campaign to seize control over the future of cryptocurrency.”

A Strategic Lawsuit

The lawsuit argued that if the SEC continues to exert its authority over Ethereum, it would bring the blockchain to a halt, “crippling one of the internet’s greatest innovations.”

Consensys revealed that its actions against the SEC followed its receipt of a Wells Notice on April 10, indicating that the regulator is preparing to bring enforcement actions against the company over the services of its MetaMask wallet. The company highlighted that MetaMask is not a broker and “neither holds customers’ digital assets nor carries out any transaction functions.”

Clarifying Regulations

With the lawsuit, the blockchain company is seeking the Texas federal court’s ruling that Ethereum is not a security and not under the authority of the SEC. Furthermore, it needs the assurance that any investigation into the company on the premises of Ethereum as a security “would violate” its Fifth Amendment rights and the Administrative Procedures Act. Additionally, the lawsuit seeks the ruling that MetaMask is not a broker and that the staking services offered by the platform do not violate securities laws.

“The SEC’s unlawful seizure of authority over ETH would spell disaster for the Ethereum network, and for Consensys,” the lawsuit noted.

The status of Ethereum hangs in the balance as the SEC’s Chair, Gary Gensler, earlier said that many digital currencies are unregistered securities and fall under the regulator’s purview. Bitcoin is the only cryptocurrency that the regulator considers a commodity, giving its regulatory rights to the Commodity Futures Trading Commission.

Meanwhile, Coinbase sued the SEC over the clarification of crypto-centric rules. However, the regulator took action against a number of crypto companies over lapses in regulations and is now fighting legal battles with multiple big names like Ripple, Coinbase, and Binance.

A Strategic Lawsuit

The lawsuit argued that if the SEC continues to exert its authority over Ethereum, it would bring the blockchain to a halt, “crippling one of the internet’s greatest innovations.”