Consensys Sues SEC Over Ethereum Regulations
The prominent provider of web3 and blockchain software technology, Consensys, has taken legal action against the Securities and Exchange Commission (SEC) and its five commissioners in response to what it deems as an unauthorized assertion of control over Ethereum. Today, Consensys initiated a lawsuit against the SEC with the aim of safeguarding Ethereum as a crucial blockchain platform and ensuring continued access for developers, market participants, and institutions.
The lawsuit details various incidents of what Consensys views as unwarranted and unlawful interference by the SEC in attempting to regulate Ethereum through enforcement actions against Consensys and potentially other entities. The company is seeking a court declaration affirming that Ethereum (ETH) is not a security and asserts that any investigation into ConsenSys on the basis of Ethereum being classified as a security would infringe upon the company’s Fifth Amendment rights and the Administrative Procedures Act.
Consensys also argues that its MetaMask service does not qualify as a broker under federal law and is compliant with securities regulations. Additionally, the company is requesting an injunction to prevent the SEC from investigating or taking enforcement actions related to MetaMask’s Swaps or Staking functions.
Following the receipt of a Wells notice from the SEC on April 10 regarding potential enforcement actions related to its MetaMask wallet program, Consensys refutes allegations of acting as a broker, stating that the wallet functions solely as an interface without holding customers’ digital assets or conducting transactions.
The lawsuit highlights the discrepancy between the SEC’s current oversight of Ethereum as a security and its previous classification of the cryptocurrency as a commodity. Consensys argues that the SEC’s recent efforts to assert control over Ethereum contradict the consistent regulatory framework within which the company has operated, potentially violating its due process rights.
The lawsuit also emphasizes the detrimental impact the SEC’s actions could have on the Ethereum network and Consensys, citing the “major questions doctrine” as a fundamental factor in challenging the SEC’s overreach. This doctrine, established by a Supreme Court ruling, restricts federal regulators from exceeding their authorized responsibilities without proper notice.
The lawsuit references previous court rulings in disputes involving Terraform Labs and Coinbase, where judges rejected the notion that cryptocurrency falls under certain regulatory frameworks. Consensys is advocating for clarity and fair treatment in the regulatory landscape surrounding Ethereum amid the ongoing debate with the SEC.
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