Consensys Sues SEC Over ‘Unlawful Seizure Of Authority’ Over Ethereum

I’ve observed a filing made on Thursday against the SEC and each of its commissioners by Consensys. In this filing, they disclosed receiving a Wells notice from the SEC on April 10. This notice signaled the SEC’s intention to initiate an enforcement action against Consensys for allegedly violating securities laws through their MetaMask wallet product. However, Consensys maintains that they don’t function as a broker. Instead, they describe the MetaMask wallet as “merely an interface,” asserting that it doesn’t store customers’ digital assets nor executes transaction functions.

The criticism points out that the Securities and Exchange Commission’s (SEC) attempt to assert more control over Ethereum contradicts its previous declarations, including those made by ex-director Bill Hinman in 2018, which classified Ethereum as a commodity rather than a security. Furthermore, it’s important to note that the SEC’s counterpart regulatory body, the Commodities Futures Trading Commission (CFTC), is responsible for regulating Ethereum and its related derivative products.

I’ve observed Consensys stating that they established their business amidst the regulatory consensus. Now, the SEC’s recent power play over Ethereum, which Consensys refers to as a drastic shift or “about-face,” could potentially infringe upon the Constitutional requirement of fair notice under the Due Process Clause if implemented.

The suit relies on the “major questions doctrine,” a Supreme Court decision limiting federal regulators from significantly expanding their authority as granted by Congress. Two judges have previously dismissed this argument in hearings initiated by Terraform Labs and Coinbase regarding crypto assets.

I’ve observed ConsenSys taking legal action in the Northern District Court of Texas. They joined forces with organizations such as the Blockchain Association and businesses including Legit Exchange, who have also filed similar preemptive lawsuits. Our intent here is to prevent the SEC from classifying certain crypto companies or assets as securities.

Over the past few months, I’ve noticed an uptick in regulatory action against crypto exchanges, including Binance.US, Binance, and Kraken. More recently, Uniswap Labs disclosed that they too had received a Wells Notice from the Securities and Exchange Commission (SEC).