Crypto Firm Consensys Sues SEC Over Ethereum, Seeks Court’s Declaration of ETH as Non-Security

The fight between the US Securities and Exchanges Commission (SEC) and crypto has intensified, with Consensys suing the regulator in a Texas federal court. 

According to the Thursday filing, Consensys, a major Ethereum supporter, wants the court to declare ETH non-security. The complaint comes as a means to intercept an impending SEC lawsuit against it over some features of its Meta Mask wallet.

Consensys Files a Lawsuit Against the SEC

In the latest filing, Consensys noted that the SEC, through its target on ETH, brought major legal uncertainty into the crypto industry. 

The 34-page document pointed out the illegality of the SEC’s efforts against Ether and noted that the move was sending threatening signals to the entire crypto industry and blockchain technology.

JUST IN: 🇺🇸 Crypto firm Consensys sues SEC and asks court to declare that Ethereum $ETH is not a security.

— Watcher.Guru (@WatcherGuru) April 25, 2024

Recall that the securities regulator has set its eyes on the Ethereum Foundation and associated firms in a move to classify ETH as a security. This has sparked controversies in the industry regarding pending applications for Spot ETH ETF.

In addition, the SEC’s efforts against Ether pose a significant threat to Ethereum and its associates, such as Consensys. Also, the firm’s filing noted the critical implications if the agency succeeds in declaring ETH as a security. 

It tags the SEC’s pursuit to label Ether security as “unlawful,” nothing the move will bring disaster to the Ethereum network.

Every ETH holder, including Consensys, would be cautious when transferring ETH on the network for fear of violating the securities laws. As a result, people will stop using the Ethereum blockchain in the US, crippling one of the greatest internet innovations, the filing states.

The SEC Intensifies Its Crackdown On the Crypto Industry

The SEC has increased its pressures with more aggressive enforcement approaches against the crypto industry. Under Gary Gensler’s leadership, the commission has released several subpoenas against Ethereum-related firms. 

The regulator has demanded certain documents regarding the Ethereum blockchain in its crackdown moves.

Many within the crypto space have condemned the regulator’s enforcement actions. Some believe that the SEC’s extended authority amounts to totalitarianism and a violation of privacy. 

The latest filing indicated that the SEC issued a Wells Notice to Consensys earlier this month. Such a notice is a formal warning about the agency’s plan to sue an entity and usually ends in a settlement.

In the filing, Consensys disclosed that the SEC has been targeting its wallet, MetaMask. The agency informed Consensys that MetaMask operates as an unlicensed broker-dealer through a phone call. 

The regulator frowns at MetaMask offering users means of staking Ethereum without being duly registered as a securities broker. In a Fortune interview, Joe Lubin, founder of Consensys, described the SEC’s theory that staking ETH makes its security preposterous. 

According to Lubin, staking is just a way of posting surety that proves your contributions on the Ethereum blockchain to get paid. It does not make Ether a security.

Lubin cites Gensler’s legal position as an attempt to halt the growth of crypto and justify the SEC’s refusal to approve the pending spot ETH ETF applications. Per Consensys founder, the SEC’s aggressive moves to regulate a technology like crypto where it shouldn’t stifle innovation.