SEC’s Case Against ConsenSys to Proceed on Expedited Schedule

The court has approved an expedited schedule for hearings in the SEC case against ConsenSys, set to take place from July 29 to November 26. This was announced by the company’s lawyer, Bill Hughes.

Important News about about @Consensys v. Gensler. Judge O’Connor granted our request that he consider the merits of our case on an expedited basis: whether the SEC has Congressional authority to regulate MetaMask as a securities broker and issuer. Those questions would be… pic.twitter.com/B6jFQebjCk

— Bill Hughes : wchughes.eth ? (@BillHughesDC) July 2, 2024

“Important news about ConsenSys versus [regulator head] Gary Gensler. Judge Reed O’Connor granted our request to consider our case on an expedited basis: whether the SEC has Congressional authority to regulate MetaMask as a securities broker and issuer,” reads the publication, which includes the hearing schedule.

Hughes noted that these questions will be considered “alongside any arguments the SEC presents to prevent [the company] from pursuing a case against them.”

On June 28, the Commission filed a lawsuit against ConsenSys. According to the complaint, since October 2020, the firm has been “operating as an unregistered securities broker,” and since January 2023, it has been involved in their sale through MetaMask Staking. Specifically, the liquid staking services Lido and Rocket Pool are mentioned.

Prior to this, ConsenSys challenged the SEC and its five unnamed employees over “oversight of ETH.” It urged the court to officially establish a definition under which the asset would not be considered a security. 

Other Arguments

On June 29, Judge Amy Berman Jackson of the District Court for the District of Columbia partially dismissed the SEC’s lawsuit against the cryptocurrency exchange Binance, but left most of the allegations intact.

The exchange’s successful motion to dismiss claims regarding secondary sales of the BNB token, the offering of the BUSD stablecoin, and the Simple Earn product is likely to aid other companies in legal battles with the regulator. 

In recent days, Coinbase and Ripple have frequently referenced the judge’s ruling in the Binance and SEC case. 

According to a document filed by the American cryptocurrency exchange Coinbase, Judge Jackson’s opinion “exacerbates the confusion caused by the SEC in the industry.”

“Binance also supports the requirement for the SEC to engage in rulemaking regarding digital assets. […] Rulemaking is necessary here because the Commission has adopted a new and radical, yet still undefined, view of securities laws — one it has never explained coherently but attempts to impose on the digital asset industry,” states the Coinbase motion.

For years, the company has been urging the SEC to develop clear rules for the industry. In July 2022, the trading platform filed a petition with the Commission, and in April 2023, it turned to the court.

In June 2024, Coinbase sued the SEC and the FDIC for lack of transparency. 

In another statement, the cryptocurrency exchange also referenced the judge’s decision in the Binance case:

“[The ruling] underscores the urgent need for appellate review to provide clarity on the application of securities laws and the regulation of cryptocurrency market participants.” 

Ripple Labs also utilized the Binance case in its arguments. The company referred to Judge Jackson’s position that cryptocurrencies “do not quite fit” the Howey test, and the decision to regulate each individual firm “is not an effective course of action.”

“This observation supports Ripple’s argument that providing clarity on the legality of various types of XRP sales was the most important aspect of the court’s decision in summary judgment,” the documents state. 

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

In June, ConsenSys reported that the SEC’s enforcement division had closed its investigation into Ethereum 2.0. The agency took this step after the organization sent a letter requesting clarification on the asset class when approving spot ETH-ETFs.