CONSENSYS SUES SEC OVER ETHEREUM REGULATION 

Consensys has initiated legal proceedings against the U.S. Securities and Exchange Commission (SEC), challenging the regulator’s potential classification of Ethereum’s Ether as a security.

Filed on Thursday, the lawsuit seeks to prevent the SEC from imposing regulatory actions on Consensys’ MetaMask wallet and aims for a judicial declaration that Ether is not a security. The company contends that treating Ether as a security could harm the United States’ blockchain technology sector.

Consensys Calls for Clarity

The legal filing argues that the SEC’s approach to Ether would undermine the ability of the U.S. to engage with Ethereum and related blockchain technologies, posing a risk to national technological competitiveness.

Consensys is requesting a court affirmation that Ether does not meet the security criteria, claiming that any SEC investigations assuming such a classification would infringe on its Fifth Amendment rights and violate the Administrative Procedures Act.

The lawsuit further aims to confirm that MetaMask, Consensys’ digital wallet, is not a brokerage and that its staking services do not contravene securities regulations.

Earlier on April 10, Consensys was issued a Wells notice by the SEC, suggesting that the regulator might take enforcement action for supposed securities law breaches concerning MetaMask. The company references a 2018 statement by former SEC director Bill Hinman, who deemed Ether a commodity, highlighting the SEC’s past inconsistency and the Commodity Futures Trading Commission’s (CFTC) regulation of Ethereum derivatives to support its stance.

Consensys accuses the SEC of reversing its earlier position without adequate notice, arguing this violates the Constitutional guarantee of fair notice under the Due Process Clause.

The firm also invokes the “major questions doctrine,” a legal theory that restricts federal agencies from extending beyond their authorized powers, warning of significant impacts on Ethereum and Consensys if the SEC’s measures are enforced.

Amidst SEC’s Broad Crypto Enforcement

This lawsuit emerges as SEC Chairman Gary Gensler intensifies his scrutiny on prominent crypto entities like Coinbase and Uniswap. Gensler’s method includes demanding records from these organizations and their interactions with the Ethereum Foundation.

The crypto community has expressed frustration with Gensler’s approach, criticizing the lack of specific regulatory frameworks for blockchain technology. However, Gensler maintains that the existing securities laws are adequate and accuses the crypto sector of evading regulations.

Filed in the Northern District of Texas, Consensys’ legal action is part of a broader trend of preemptive lawsuits by entities such as the Blockchain Association and Legit Exchange, aiming to challenge the SEC’s recent focus on Ethereum’s staking features.

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