Consensys files suit against SEC for “excessive” regulation

(Kitco News) – Cryptocurrency companies continue to battle regulatory crackdown by the Securities and Exchange Commission (SEC) as Consensys, a leading blockchain and web3 software technology company specializing in Ethereum (ETH), filed a complaint in the U.S. District Court for the Northern District of Texas that accuses the regulator and five commissioners of intending to classify Ethereum as a security.

“The complaint highlights how the SEC is attempting to illegally regulate Ether through ad hoc enforcement actions against Consensys and possibly others – the latest examples of aggressive and illegal SEC overreach,” Consensys said in a press release. release. “If allowed to expand its regulatory reach, the SEC would effectively destroy the value of hundreds of millions of Ether holders and end use of the Ethereum blockchain in the United States, thereby crippling the technological evolution of the Internet. »

Consensys said the goal of filing the lawsuit was to “ensure that Ethereum remains a dynamic and indispensable blockchain platform and the foundation for countless new Web3 innovations, technologies and products.”

“The filing we filed today aims to preserve access for the thousands of developers, market participants and institutions who have interests in the world’s second largest blockchain,” said Joe Lubin, co -founder of Ethereum and founder/CEO of Consensys. “The SEC cannot be permitted to arbitrarily expand its jurisdiction to regulate what is clearly and on the prior admission of the SEC a commodity.”

Lubin added that he hopes the lawsuit will draw greater attention to “and ultimately put an end to the SEC’s reckless approach and restore the type of regulatory certainty and common sense that are so essential to Web3 technologies and a well-functioning innovation economy.

The lawsuit asks the court to confirm that the SEC has no legal authority to regulate Ether, user-controlled software interfaces built on Ethereum, or the Ethereum blockchain in general.

The reasoning behind this argument is threefold.

“The SEC only has jurisdiction over securities and, until recently, has agreed that Ether, the digital asset that allows users to access and transact on the Ethereum network, is not and should not be treated as security,” Consensys said. The SEC also “has no legal authority to regulate the technological evolution of the Internet.”

“Ether can be traded as a commodity (like oil), but it is also essential to the technological development of Ethereum-based applications – including applications that have obvious non-financial utility for vital sectors like healthcare, energy, transport, media, agriculture and beyond,” argued Consensys. “The SEC’s approach would prevent U.S. developers from building on Ethereum because it would misclassify non-financial platforms as financial applications and effectively shut down U.S. transactions on Ether, imposing registration requirements with the SEC which have no legal basis and would be impossible. to comply with.”

The third reason is that “apps that allow people to buy, sell and transfer Ether on their own are not securities brokers,” the statement said.

“One of Consensys’ products, the MetaMask wallet, gives users everything they need to explore Web3; from managing their identity, to sending and receiving cryptocurrency, to connecting to decentralized applications built on Ethereum,” they noted. “Declaring that a software developer creating user-controlled tools is a stockbroker would effectively prevent Web3 developers from continuing to create next-generation applications themselves.”

The trial has four main objectives. First, it seeks a declaration that Ether is not a security and, therefore, the SEC’s investigation into Ether and Ethereum and any resulting enforcement actions are beyond its regulatory authority.

Second, “any enforcement action against Consensys based on the fact that Ether is a security or that Ether transactions are securities transactions would violate due process and fair notice,” they argued.

Third, Consensys requests a declaration that the company “does not act as a broker-dealer and does not offer or sell securities through the Swaps and Staking functionality of its MetaMask wallet software.”

Finally, the company wishes to make known that “any investigation or enforcement action against Consensys based on the fact that it acts as a broker-dealer or that it offers and sells securities through its MetaMask software would exceed the authority of the SEC”, indicates the press release. “Consensys further requests an order prohibiting the SEC from further investigation or taking enforcement action regarding its sales of Ether and MetaMask.”

“Ethereum is a world-changing technology, and Ether itself has the potential to be an important driver of the U.S. economy of the future,” Lubin said. “The SEC’s illegal regulation, however, threatens to undermine this potential and hinders the United States’ ability to use blockchain technology as the basis for countless new innovations and technologies – even as other countries move ahead.

“We are therefore taking decisive and proactive action on behalf of the industry at this critical time for the future of Ethereum, other decentralized protocol technologies and of course for the entire next chapter of the development of the Internet,” he said. he added. “We are committed to this cause and determined to win.”

Paul Grewal, Coinbase’s chief legal officer, backed Consensys in an article on .

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