Consensys files lawsuit against SEC over ethereum regulation

The lawsuit filed on Thursday aims to stop the upcoming action of SEC against Consensys’ MetaMask wallet and seeks a key ruling on the classification of ethereum.

– The U.S. Securities and Exchange Commission (SEC) has threatened to regulate ethereum as a security, jeopardizing the ability of the U.S. to utilize ethereum and similar blockchain technology – states the filing.

Consensys advocates for a federal court declaration affirming that ethereum is not a security. It argues that any investigation based on ethereum being a security would violate the company’s rights under the Fifth Amendment and the Administrative Procedure Act.

The lawsuit also seeks to clarify that MetaMask, Consensys’ wallet, does not operate as a broker under federal law, and its staking service does not violate securities laws.

Consensys received a Wells notice from the SEC on April 10, indicating the SEC’s intent to proceed with enforcement actions against the company for alleged violations of securities laws through the MetaMask wallet. The complaint also references the SEC’s previous stance on ethereum, citing a speech by former director Bill Hinman in 2018, which classified ethereum as a commodity.

Consensys highlights the inconsistency of the SEC in its approach and points to the Commodity Futures Trading Commission’s (CFTC) jurisdiction over ethereum derivatives as additional evidence of its commodity status.

It argues that this shift represents a turn that contradicts the constitutional requirement of fair notice under the due process clause.

Consensys also invokes the ‘major questions doctrine’, a legal principle that limits federal regulators from exceeding their congressional mandates. The company warns of serious consequences for both the ethereum blockchain and Consensys if the SEC’s actions continue unchecked.

Gensler’s crypto crackdown

The lawsuit against the agency comes amid aggressive targeting of major crypto players, such as Coinbase and Uniswap, by SEC Chairman Gary Gensler.

Gensler’s approach includes issuing subpoenas to companies for documents related to their interactions with the Ethereum Foundation, a nonprofit organization that supports blockchain development.

Critics within the crypto industry are angry at Gensler’s tactics. They argue that the SEC has not provided clear regulatory guidance tailored to the unique characteristics of blockchain technology. Gensler denies these criticisms, asserting that existing securities laws are sufficient and blaming the crypto industry for non-compliance.

Consensys’ lawsuit, filed in the Northern District of Texas, aligns with similar preemptive legal actions taken by groups like the Blockchain Association and companies like Legit Exchange. Despite these legal actions, Gensler continues to emphasize ethereum’s staking feature as the basis for the SEC’s recent legal stance.