Author: Cheyenne Ligon, Nikhilesh De, CoinDesk; Translated by: Baishui, Jinse Finance
Ethereum developer Consensys has filed a lawsuit against the U.S. Securities and Exchange Commission, fighting back against what the company calls an “illegal power grab” over Ethereum by federal regulators.
The company wants a federal court to declare that Ethereum (ETH) is not a security and that any investigation into ConsenSys based on the view that ETH is a security "would violate" the company's Fifth Amendment rights and the Administrative Procedure Act, which states that MetaMask is not a security. Under federal law, MetaMask's staking service does not violate securities laws and an injunction against the SEC's investigation or enforcement action related to MetaMask's swap or staking functionality.
In a lawsuit filed Thursday against the SEC and all five of its commissioners, Consensys revealed that it received a Wells Notice from the SEC on April 10, indicating its intent to take enforcement action against the company for securities violations through its MetaMask wallet product. Consensys denies acting as a broker and says the wallet is “simple and interface-free” and “neither holds customers’ digital assets nor performs any trading functions.”
The complaint also adds that the SEC’s intrusive authority over Ethereum goes against its past statements that the cryptocurrency is a commodity, not a security (citing a 2018 speech by former director Bill Hinman), as well as the authority that the SEC’s sister regulator, the Commodity Futures Trading Commission (CFTC), has over Ethereum.
ConsenSys claims in its lawsuit that it “built its business on the back of this regulatory consensus” and that the SEC’s new power grab over Ethereum, which it calls a “U-turn,” “violates constitutional requirements of fairness.”
“The SEC’s unlawful seizure of power over ETH would spell disaster for the Ethereum network and ConsenSys,” the lawsuit states.
An SEC representative declined to comment on the lawsuit.
The lawsuit also relies on the “substantial questions doctrine,” a Supreme Court ruling that bars federal regulators from significantly exceeding the scope of congressional authorizations. In arguments raised by Terraform Labs and Coinbase, two judges have already rejected the idea that cryptocurrencies fall under that doctrine.
ConsenSys filed the lawsuit in the U.S. District Court for the Northern District of Texas, joining groups such as the Blockchain Association and companies such as Legit Exchange, which have filed similar preemptive lawsuits seeking to prevent the SEC from deeming certain crypto companies or assets as securities.
In recent months, the SEC has also filed lawsuits against cryptocurrency exchanges such as Binance.US, Binance, and Kraken. Uniswap Labs revealed earlier this month that it had also received a Wells Notice from the regulator.
