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ConsenSys has taken on the U.S. Securities and Exchange Commission (SEC) by filing a lawsuit in Texas federal court. The case focuses on the classification of Ethereum’s Ether as a security. ConsenSys argues this designation could harm the entire Ethereum network, posing significant risks to its functionality and innovation. This lawsuit not only challenges regulatory overreach but also aims to protect the foundational areas of the Ethereum ecosystem.
Consensys Comes Amid Ethereum ETF Battle
Software development firm ConsenSys has initiated a lawsuit against the U.S. Securities and Exchange Commission (SEC) and its five commissioners, accusing them of attempting to regulate Ether (ETH) as a security.
🚨 Consensys is suing the SEC!
— Ariel Givner, Esq. (@GivnerAriel) April 25, 2024
Where? Texas Federal court.
Why? To prevent an impending lawsuit over MetaMask wallet features being an labeled as an unlicensed broker dealer AND to argue that $ETH is not a security. @Consensys might just be the hero we need. pic.twitter.com/Y8ZxWzPci2
In a legal filing dated April 25 in the U.S. District Court for the Northern District of Texas, ConsenSys claims that the SEC is leading a concerted effort to dominate the future of cryptocurrencies through enforcement actions that would classify Ether as a security. The company pointed to past statements by SEC Chair Gary Gensler and the agency’s previous acknowledgements in 2018 that ETH was not a security, highlighting the severe implications for businesses that have been established based on this regulatory understanding.
The filing said, “The SEC’s unlawful seizure of authority over ETH would spell disaster for the Ethereum network, and for Consensys. Every holder of ETH, including Consensys, would fear violating the securities laws if he or she were to transfer ETH on the network. And the ability of anyone new to acquire ETH to use Ethereum’s repository of decentralized applications and services would be extinguished. This would bring use of the Ethereum blockchain in the United States to a halt, crippling one of the internet’s greatest innovations.”
Consensys founder said, “They are trying to regulate a technology on its merits, which the SEC shouldn’t be doing. They’re trying to stifle certain kinds of innovation. And they’re trying to do that because probably they see Ether spot ETFs as a floodgate that’s going to bring a lot of capital into our ecosystem.”
SEC’s Aggressive Actions On Crypto
The recent lawsuit emerges in the context of an intensified enforcement drive by SEC Chairman Gary Gensler against major players in the cryptocurrency industry, such as Coinbase and Uniswap.
Over the past few weeks, this initiative has seen a flurry of subpoenas directed at various companies and developers. These subpoenas demand documents concerning their interactions with the nonprofit Ethereum Foundation, which plays a crucial role in the development of the blockchain.
The lawsuit filed by Consensys on Thursday disclosed that earlier in the month, the SEC had sent them a Wells Notice, a formal notification indicating the agency’s intent to initiate legal action, which typically precedes a settlement. In a subsequent phone conversation, the SEC accused MetaMask, operated by Consensys, of functioning as an unlicensed broker-dealer. Consensys also noted that the SEC’s concerns came from MetaMask enabling users to stake Ethereum.