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Consensys issued the SEC after they accused them of acting as an unregistered securities broker by providing its MetaMask wallet software.
Consensys has sued the SEC and its five commissioners over plans to regulate ETH as a security, citing disastrous effects on the network and innovation in the US. The company also warns about the potential ramifications of the commission changing its position on ETH after firms had already built businesses based on regulatory precedent, referring to the SEC’s record and Chair Gary Gensler’s statements.
Disastrous effects on the Ethereum network
Consensys has stated that if the SEC unlawfully seizes authority over ETH, it would cause disastrous effects on the Ethereum network. The company emphasized that if the commission reverses its stance on Ether, every holder of ETH.
Consensys would fear violating securities laws if they transferred ETH to the network, and new users’ ability to acquire ETH to use Ethereum’s decentralized applications and services would be extinguished. Consequently, the use of the Ethereum blockchain in the United States would come to a halt, which would cripple one of the internet’s most significant innovations.
About the Lawsuit
The lawsuit explicitly targets Gensler’s inconsistent statements on Ether and all five SEC commissioners in their official capacity. In an April 2023 hearing, Gensler ducked questions on whether ETH was under the commission’s regulatory reach despite stating in 2018 that Ether was not a security.
According to Consensys, the company received three subpoenas in 2023 regarding requests for information related to acquisitions, holdings, and sales of ETH.
The company reiterated that the SEC’s ongoing efforts to classify Ether as a security would harm firms attempting to operate in good faith with regulatory guidelines.
The Declaration Request
The company has asked the court to declare “ETH is not a security under the Securities Act, and that the sales of ETH by Consensys do not fall under the sales of securities.” The request for relief is being made in an official capacity.
Consensys filed the lawsuit in Texas, where the company has a headquarters in Fort Worth. The state’s federal districts have also been a hotbed for crypto-related legal matters.
The SEC’s efforts to expand its Dealer Rule have resulted in a lawsuit filed by the Blockchain Association and Crypto Freedom Alliance of Texas on April 23. However, in February, the Texas Blockchain Council and Riot Platforms filed a lawsuit over information on energy usage from crypto miners.
At the time of publication, the SEC had not filed a lawsuit against Consensys, but a Wells notice can sometimes be a sign that the commission plans to bring an enforcement action. The SEC has ongoing civil cases against Coinbase, Binance, and Ripple and recently concluded a trial in an action against Terraform Labs and Do Kwon.
Summary
commissioners over plans to regulate ETH as a security. The lawsuit specifically targets Gensler’s inconsistent statements on Ether and all five SEC commissioners in their official capacity. Consensys filed the lawsuit in Texas, where the company has a headquarters in Fort Worth.
Disclaimer
The views and opinions stated by the author or any people named in this article are for informational purposes only. They do not establish financial, investment, or other advice. Investing in or trading in stocks, cryptos, or other related indexes comes with a risk of financial loss.
Steefan George is a crypto and blockchain enthusiast, with a remarkable grasp on market and technology. Having a graduate degree in computer science and an MBA in BFSI, he is an excellent technology writer at The Coin Republic. He is passionate about getting a billion of the human population onto Web3. His principle is to write like “explaining to a 6-year old”, so that a layman can learn the potential of, and get benefitted from this revolutionary technology.
