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- Consensys has launched legal action against the SEC, aiming to establish Ethereum’s Ether token as a non-security
- The SEC has hinted that Ethereum may be a security, and Consensys wants to pre-empt legal action to this effect
- Filed in a Texas federal court, the lawsuit has garnered significant backing from the crypto community
Consensys, a major supporter of the Ethereum blockchain, has initiated legal action against the US Securities and Exchange Commission (SEC) over the designation of the cryptocurrency. Filed in a Texas federal court, the lawsuit seeks to fend off an impending SEC lawsuit against Consensys over features of its MetaMask wallet and to establish Ethereum’s digital token, Ether, as non-security. The filing has received huge support from the crypto space, with many exasperated that such lengths are needed to establish Ethereum’s status.
Consensys Wants Clarity
The 34-page legal filing by Consensys portrays the SEC’s attempts to assert jurisdiction over Ethereum as unlawful and potentially detrimental to blockchain technology at large. Consensys argues that such actions could bring Ethereum transactions in the US to a standstill, jeopardizing innovation in the digital asset space, right at a time when some of the world’s biggest asset managers have filed for Ethereum ETFs.
We took this step for two very basic reasons:
(1) the SEC should not be allowed to arbitrarily expand its jurisdiction to include regulating the future of the internet by wrongly labeling ETH a security; and
(2) the SEC’s reckless approach is bringing chaos to developers,…
— Consensys (@Consensys) April 25, 2024
The SEC, and Chair Gary Gensler in particular, have been almost deliberately unclear on Ethereum’s standing, with Gensler saying in the wake of its transition from a proof-of-work to a proof-of-stake protocol that it most likely now qualified as a security. However, during a House Financial Services Committee hearing last year, Gensler refused to confirm his views on the matter, sparking consternation from the crypto community.
CFTC Says Ethereum is a Commodity
The SEC’s intransigence over the issue was highlighted in April when the United States Commodity Futures Trading Commission (CFTC) stated in a lawsuit against KuCoin that Litecoin and Ethereum are commodities, something that the crypto community clearly hasn’t forgotten:
I know ETH is a commodity. You know ETH is a commodity. The CFTC knows ETH is a commodity. It’s time for the SEC to admit that it still knows ETH is a commodity too. No more games. Thank you to @Consensys for standing up against the SEC’s unlawful expansion of authority. https://t.co/8w7A4PBwUK
— paulgrewal.eth (@iampaulgrewal) April 25, 2024
The Consensys lawsuit, strategically filed in Texas, aligns with the crypto industry’s broader plan to challenge agency actions in the US Court of Appeals for the Fifth Circuit. This move reflects a concerted effort to push back against the SEC’s regulatory overreach and seek clarity on Ethereum’s legal status.
The lawsuit not only seeks to establish Ethereum’s non-security classification but also challenges the SEC’s investigation into MetaMask’s operations, calling for injunctions against the SEC’s actions and emphasizing violations of due process and administrative protocols.
