Ethereum
Consensys sues SEC for “illegal taking of authority” over Ethereum
Ethereum developer Consensys has filed a lawsuit against the U.S. Securities and Exchange Commission, fighting back against what the company calls an “unlawful seizure of authority” over Ethereum by the federal regulator.
The company wants a federal court to declare that ETH (ETH) is not a security, any investigation into ConsenSys based on the idea that ETH is a security would “violate” the company’s Fifth Amendment rights and the Administrative Procedure Act, that MetaMask is not a security broker under federal law, that MetaMask’s staking service does not violate securities law and an injunction against the SEC investigating or taking enforcement action related to MetaMask’s swaps or staking functions.
In the complaint filed Thursday against the SEC and its five commissioners, Consensys disclosed that it received a Wells Notice from the SEC on April 10, indicating its intent to take enforcement action against the company for violations of securities laws through its wallet product MetaMask. Consensys denies acting as a broker, saying the wallet is “simply an interface” and “does not hold clients’ digital assets or perform any transaction functions.”
The complaint adds that the SEC’s encroaching authority on Ethereum flies in the face of its own past statements that the cryptocurrency is a commodity and not a security (quoting former director Bill Hinman). speech 2018), as well as the SEC’s sister regulatory agency, the Commodities Futures Trading Commission (CFTC), has authority over Ethereum, which oversees ether-related derivatives.
In its complaint, Consensys claims to have “built its business in the context of this regulatory consensus”, and the SEC’s new takeover – which it describes as an “about-face” – over Ethereum “would therefore violate the constitutional requirement of equity”. notice under the due process clause.
“Illegal seizure of the SEC’s authority over ETH would be a disaster for the Ethereum network and for Consensys,” the suit claims.
A representative for the SEC declined to comment on the suit.
The lawsuit also relies on the “major issues doctrine,” a Supreme Court ruling barring federal regulators from significantly overstepping the scope of their congressional mandate. Two judges have already rejected the idea that crypto falls under the doctrine during the pleadings brought by Terraform Laboratories And Coinbase.
ConsenSys filed the suit in the U.S. District Court for the Northern District of Texas, joining groups such as the Blockchain Association and companies like Legit Exchange, which have filed similar preemptive lawsuits aimed at blocking the SEC from dealing with certain companies or assets of cryptography like securities.
In recent months, the SEC has also filed lawsuits against cryptocurrency exchanges like Binance.US, Binance, and Kraken. Uniswap Labs revealed earlier this month that it had also received a Wells Notice from the regulator.
UPDATE (April 25, 2024 at 7:41 p.m. UTC): Adds that the SEC declined to comment.