– Lawsuit Filed by Cryptocurrency Company Against SEC, Claiming Overreach in Ether Governance

15 views 1:57 pm 0 Comments May 13, 2024

Illustration: Dado Ruvic (Reuters)

In a significant legal development, Consensys, the entity behind the widely-used crypto wallet MetaMask, has initiated legal proceedings against the U.S. Securities and Exchange Commission (SEC) in a Texas court. The legal complaint asserts that the SEC is exceeding its regulatory mandate by seeking to categorize Ether, the digital currency linked to Ethereum, as a security. This action is viewed as an endeavor by the SEC to exert control over the future direction of cryptocurrencies.

Consensys has underscored the SEC’s prior stance in 2018, when Ether was not classified as a security. The company has expressed apprehensions regarding the potential consequences of a shift in the SEC’s position at this juncture, especially considering that many businesses have organized their activities based on the current regulatory structure established by the SEC.

In its legal submission, Consensys stated, “The US Securities and Exchange Commission seeks to regulate ETH as a security, even though ETH bears none of the attributes of a security — and even though the SEC has previously told the world that ETH is not a security, and not within the SEC’s statutory jurisdiction.”

Furthermore, Consensys has alleged that the SEC singled out its MetaMask crypto wallet, a platform enabling users to securely hold Ether and various other cryptocurrencies. The company disclosed that it was served with a Wells notice from the SEC on April 10, indicating potential enforcement actions related to its MetaMask Swaps and MetaMask Staking services.

This legal maneuver by Consensys follows the SEC’s recent enforcement actions against entities operating within the Ethereum network and the prominent crypto exchange Coinbase, which were accused of engaging in transactions involving unregistered securities.

The ongoing discourse surrounding cryptocurrencies, including Ether, has prompted inquiries into their classification as currency, security, or commodity since the emergence of Bitcoin in 2009.

Gary Gensler, the chair of the SEC and a former blockchain and cryptocurrency educator at the Massachusetts Institute of Technology, is known for his rigorous stance on crypto regulation. Describing the cryptocurrency market as a “Wild West,” Gensler stresses the importance of regulatory frameworks to oversee this swiftly evolving industry.