In a move to safeguard the future of blockchain technology in the United States, Consensys has initiated legal proceedings against the U.S. Securities and Exchange Commission (SEC).
The lawsuit, filed on Thursday, aims to prevent an impending regulatory crackdown by the SEC on Consensys’ MetaMask wallet. At the heart of the dispute lies the classification of Ethereum’s native token, Ether, with Consensys seeking a pivotal ruling on its status.
Challenging the SEC’s Position
The filing asserts that the SEC’s proposed classification of Ether as a security would not only endanger the use of Ethereum and similar blockchain technologies in the U.S. but also impinge upon Consensys’ Fifth Amendment rights and the Administrative Procedures Act.
Consensys is seeking a declaration from a federal court affirming Ether’s non-security status. Additionally, it contends that MetaMask, its wallet product, does not operate as a broker under federal law, and its staking service is compliant with securities laws.
The Genesis of the Dispute
The legal action follows a Wells notice from the SEC received by Consensys on April 10, signaling the SEC’s intent to take enforcement action against the company over alleged securities law violations through its MetaMask product. Notably, the complaint refers to former SEC director Bill Hinman’s 2018 speech, which categorized Ether as a commodity.
Consensys highlights what it perceives as inconsistencies in the SEC’s approach, pointing to the Commodities Futures Trading Commission’s jurisdiction over Ethereum derivatives as evidence of Ether’s commodity status. It argues that the SEC’s purported shift represents an “about-face” that disregards the Due Process Clause’s requirement of fair notice.
Additionally, Consensys invokes the “major questions doctrine,” warning of dire consequences for both the Ethereum network and Consensys if the SEC’s actions proceed unchecked.
Gensler’s Firm Stand
The legal action coincides with SEC Chairman Gary Gensler’s vigorous crackdown on prominent crypto entities like Coinbase and Uniswap. Gensler has pursued this approach by issuing subpoenas to firms and developers for documents related to their dealings with the Ethereum Foundation.
Critics within the crypto industry have voiced discontent with Gensler’s tactics, arguing that the SEC lacks clear regulatory guidelines tailored to the unique characteristics of blockchain technology. Gensler, however, maintains that existing securities laws suffice, attributing non-compliance to the crypto industry.
Consensys’ lawsuit, filed in the Northern District of Texas, echoes similar preemptive legal actions undertaken by entities like the Blockchain Association and companies like Legit Exchange. Despite these challenges, Gensler persists in targeting Ethereum’s staking feature as a focal point for the SEC’s recent legal stance.
