Ethereum Giant ConsenSys Sues SEC Over 'Unlawful Authority Grab'

Ethereum developer Consensys has filed a lawsuit against the SEC, alleging "unlawful seizure of authority" over Ethereum. The company argues that ETH is not a security, MetaMask is not a broker, and the SEC's actions violate its Constitutional rights. Consensys seeks a declaration that ETH is not a security, an injunction against SEC investigations, and protection for MetaMask's services.

Ethereum Developer ConsenSys Files Lawsuit Against SEC Over 'Unlawful Seizure of Authority'

In a bold move that challenges the boundaries of regulatory authority, Ethereum developer ConsenSys has filed a lawsuit against the United States Securities and Exchange Commission (SEC), accusing the federal regulator of an "unlawful seizure of authority" over the Ethereum network.

According to ConsenSys, the SEC has overstepped its mandate by asserting that Ethereum (ETH) is a security, a designation that would impose significant burdens and restrictions on the Ethereum ecosystem. The lawsuit seeks to clarify the regulatory status of ETH, prevent the SEC from investigating ConsenSys on the basis of this categorization, and restrain the agency from taking enforcement actions against MetaMask, a non-custodial cryptocurrency wallet developed by ConsenSys.

ConsenSys maintains that ETH is a commodity, not a security, and that the SEC's recent shift in stance on this issue violates the "fair notice under the Due Process Clause" of the Constitution. The company cites previous statements by the SEC, including a 2018 speech by former director Bill Hinman, which indicated that Ethereum was not a security.

Furthermore, ConsenSys argues that the SEC's assertion of authority over Ethereum conflicts with the jurisdiction of the Commodities Futures Trading Commission (CFTC), which traditionally regulates derivative products tied to commodities. The lawsuit invokes the "major questions doctrine," a Supreme Court ruling that limits the ability of federal regulators to extend their authority beyond the scope of their Congressional mandates.

The complaint, filed in the District Court for the Northern District of Texas, alleges that the SEC's actions against ConsenSys would "spell disaster for the Ethereum network" and would have a chilling effect on innovation and development in the cryptocurrency space.

In addition to seeking a declaration that ETH is not a security, ConsenSys is requesting that the court recognize MetaMask as a non-broker that does not violate securities law. The lawsuit also seeks to enjoin the SEC from investigating or taking enforcement actions related to MetaMask's "Swaps" or "Staking" functions.

The SEC declined to comment on the lawsuit, citing its policy of not commenting on pending litigation.

ConsenSys's lawsuit represents a growing trend of legal challenges to the SEC's authority over cryptocurrencies. In recent months, the SEC has filed suit against several cryptocurrency exchanges, including Binance.US, Binance, and Kraken. Uniswap Labs, another leading decentralized exchange, recently revealed that it had also received a Wells Notice from the regulator, indicating a possible enforcement action.

The outcome of ConsenSys's lawsuit could have significant implications for the cryptocurrency industry and for the relationship between regulators and crypto companies. If successful, the lawsuit could limit the SEC's ability to regulate Ethereum and other cryptocurrencies and could provide clarity on the regulatory landscape for the industry.

Key Points

• ConsenSys, the developer of Ethereum, has filed a lawsuit against the SEC, alleging "unlawful seizure of authority" over ETH.
• The lawsuit seeks to declare ETH a commodity, not a security, and to prevent the SEC from investigating or taking action against MetaMask.
• ConsenSys argues that the SEC's stance on ETH violates its own previous statements and conflicts with the jurisdiction of the CFTC.
• Legal challenges to the SEC's authority over cryptocurrencies are increasing, with several industry players filing lawsuits or receiving Wells Notices.
• The outcome of ConsenSys's lawsuit could have major implications for the cryptocurrency industry and the regulatory landscape for crypto companies.