On April 25, Consensys filed a lawsuit in opposition to the US Securities and Change Fee (SEC) over allegations that the watchdog overstepped its authority in making an attempt to manage Ethereum (ETH).
The lawsuit alleges that the SEC's purpose is to illegally regulate Ethereum by enforcement actions in opposition to varied corporations, together with Consensys, which constitutes “aggressive and unlawful” overreach.
Consensys intends to show that the SEC doesn’t have the authorized authority to manage ETH, user-controlled software program interfaces, or the Ethereum blockchain extra broadly.
Consensys desires the court docket to declare that Ethereum is just not a safety and that the agency doesn’t act as a dealer or promote securities by working MetaMask. It additionally desires the court docket to declare that authorized motion or an investigation based mostly on these grounds would exceed the SEC's authority.
As well as, Consensys is in search of an injunction to stop the SEC from persevering with its investigation into its MetaMask pockets and associated ETH gross sales or from future enforcement actions. The SEC warned Consensys of doable authorized motion by a discover to Wells and a convention name on April 10. Metamask's betting and swapping options are areas of concern.
A 3 level argument
The lawsuit has three factors. Consensys first argued that the SEC solely had jurisdiction over securities and beforehand agreed that ETH was not a safety.
Second, Consensys argued that the SEC's method misclassifies non-financial platforms as monetary purposes. It argued that ETH helps purposes on Ethereum and subsequently has a non-financial utility separate from its function as a commodity. The agency additionally mentioned that the SEC doesn’t have the authority to manage the technological growth of the Web in such a method.
Lastly, Consensys argued that MetaMask and different apps usually are not stockbrokers, however somewhat permit customers to purchase, promote and switch ETH by a broader method.
The swimsuit, filed within the U.S. District Court docket for the Northern District of Texas, names the SEC and its chairman, Gary Gensler, as defendants.
Wider implications
Whether or not the SEC considers Ethereum a safety is a long-standing problem, and the matter is related to the compliance efforts of any firm or venture that processes ETH.
On March 20, Fortune reported that the SEC had subpoenaed a lot of crypto corporations concerned within the Ethereum Basis. The Ethereum Basis itself has seemingly acquired a subpoena from an unknown authorities company on the time of the report.
One firm within the Ethereum ecosystem, Uniswap, acquired a discover from Wells on April 10 warning of potential charges. Nonetheless, it’s unclear whether or not the SEC's potential costs in opposition to Uniswap are instantly associated to ETH.
Whether or not the SEC treats ETH as a safety might additionally have an effect on the approval of spot Ethereum ETFs. SEC Chairman Gary Gensler referred to as bitcoin an unsecured commodity when approving spot bitcoin ETFs in January, stressing that the present ruling solely applies to the asset.
