ConsenSys Challenges SEC Over Ethereum Regulation

ConsenSys has filed a lawsuit against the SEC and five unnamed officials over the “regulation of ETH as a security.”

According to court documents, the regulator has orchestrated a campaign “to seize control over the future of cryptocurrency” through enforcement actions.

The company cited the Commission’s report and referred to statements made by its chairman, Gary Gensler, in 2018, asserting that Ethereum is not a security.

“The SEC’s unlawful seizure of power over ETH will spell disaster for the Ethereum network and ConsenSys. Every asset holder, including us, will fear violating securities laws when transferring coins on the network. […] This will halt blockchain usage in the U.S., damaging one of the greatest innovations on the internet,” the lawsuit states.

ConsenSys claims that the agency has “targeted” the MetaMask wallet software, which allows users to self-custody ETH and other cryptocurrencies.

According to company representatives, on April 10, they received a notice warning of potential enforcement actions related to MetaMask Swaps and MetaMask Stakes products.

Additionally, during a phone discussion, the SEC labeled ConsenSys as an unregistered broker-dealer. In 2023, the firm also received three subpoenas concerning information requests related to the “acquisition, storage, and sale of ETH.”

The company reiterated that the regulator’s ongoing efforts to classify Ethereum as a security “pull the rug” from under firms attempting to operate in good faith under regulatory requirements.

ConsenSys is asking the court to officially establish a definition of Ethereum under which the asset would not be considered a security.

Previously, the Blockchain Association and the Texas Crypto Freedom Alliance raised complaints against the SEC, accusing it of “capricious rulemaking” and “misguided attacks” on the digital asset industry.

In April 2024, the largest decentralized exchange, Uniswap, received a warning from the SEC about a potential lawsuit.