Consensys sued the SEC to defend the U.S. Ethereum ecosystem from its overzealous regulatory overreach on April 25th, 2024. Meaningful progress has been made since then—including the SEC approving Spot ETH ETFs, a tacit acknowledgment of ETH’s status as a commodity, and closing its investigation into Ethereum 2.0 without bringing any charges alleging that sales of ETH are securities transactions. But, the fight is far from over.
The SEC is still aggressively attacking technology businesses like Consensys through ad hoc enforcement actions, including by alleging that MetaMask, our platform for accessing the decentralized web, violates securities laws. The simple fact is that MetaMask is not a securities broker-dealer or issuer, and misguided attacks like these are hurting American businesses and developers.
Consensys is an active proponent of much-needed regulatory clarity to allow an industry that serves as the backbone of countless new technologies and innovations to thrive in the United States.
“We have been operating under a cloud of uncertainty for too long, and so while it should not take a resource- and time-intensive lawsuit to provide that certainty, here we are.”
JOE LUBIN, CO-FOUNDER OF ETHEREUM AND FOUNDER/CEO OF CONSENSYS
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Why this matters
Blockchain technologies are the basis for the next generation of the internet, one which will be even more transparent and user-friendly. The focus will be on the individual, not the big companies that today dominate our online lives.
The development of blockchain technologies has been dramatic in the last decade. Ethereum and the crypto industry now directly employs 190,000 people, with 29% of them based in the U.S. Large companies, such as BlackRock, Franklin Templeton, Nike, Adidas, Publicis, and Gucci, are now using blockchain technologies to enhance their service offerings and create business efficiencies. And all of this is happening amidst a concerning backdrop of foreign adversaries that are promoting blockchain technological developments of their own.
As with most technologies, software is needed to allow users to access blockchain technologies. Now, as a last resort, the SEC is now trying to stop users from accessing the decentralized web – attempting to punish providers like Consensys, Robinhood, Coinbase, and many others in the process.
Imagine if the SEC had stopped search engines from accessing the web in the early 2000s. The U.S. would not be where it is today – home to the world’s five largest technology businesses. This is essentially what the SEC is trying to do with its attack on Metamask.
Recent press
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COINTELEGRAPH
The SEC's war against Ethereum and Consensys isn’t over
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Fortune
Ethereum wins a major battle, but its war with the SEC is far from over
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Bloomberg
Consensys CEO Joseph Lubin Says SEC Closes Ethereum Inquiry
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Reuters
Crypto firm Consensys says US regulator has closed inquiry into Ethereum 2.0
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Fortune
SEC sued over Ethereum, crypto firm asks court to state token is not a security
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Financial Times
The SEC’s power grab on digital assets threatens US innovation
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Dallas Morning News
Opinion: Ethereum, and blockchain technologies, are threatened by Washington regulators
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Joe Lubin speaks at the @FT Crypto and Digital Assets Summit
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Fox Business
New court filings show SEC, Chair Gensler believed ethereum was a security for at least a year
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Decrypt
SEC Has Secretly Considered Ethereum a Security Since 2023, Says Consensys in Unredacted Lawsuit
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Axios
Consensys files preemptive lawsuit against SEC over Ethereum
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Wall Street Journal
Consensys Sues to Block SEC From Deeming Ether a Security
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Reuters
Crypto firm Consensys sues US SEC over Ethereum regulation
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Consensys files lawsuit against SEC and commissioners over Ether regulation
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Unchained
Consensys’s Lawsuit Against The SEC: Will It End Gensler's ‘Unlawful Power Grab’?
Industry Voices
“Blockchain Association – and the entire digital asset ecosystem – stands shoulder to shoulder with Consensys as they take the fight to the SEC, challenging the Commission’s ever-expanding overreach and aggression... This critical battle impacts all aspects of the digital asset industry. We fully support Consensys in their decision to file preemptive legal action to stop the SEC’s illegal onslaught targeting emerging technologies such as public blockchains."
- The Blockchain Association
I know ETH is a commodity. You know ETH is a commodity. The CFTC knows ETH is a commodity. It's time for the SEC to admit that it still knows ETH is a commodity too. No more games. Thank you to @Consensys for standing up against the SEC's unlawful expansion of authority.
– Paul Grewal, Chief Legal Officer of Coinbase
"The evidence clearly shows that ethereum is a decentralized commodity, not a security," "ETH’s status as a commodity has now been recognized in a variety of circ*mstances, including the CFTC's regulation of ETH futures, public statements by commission officials, rulings by federal courts, and now, hopefully, this ETF."
– Matthew Sigel, Head of Digital Asset Research, VanEck
"We are proud to stand with @TXblockchain_ Council member company @Consensys as they push back against the SEC's attack on peer-to-peer blockchain tech and self-custody. What the SEC has done over the past several years is un-American and is pushing innovation overseas."
– Lee Bratcher, President and Founder of the Texas Blockchain Council
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FAQs
Why do you feel the SEC is in the wrong?
Surely, they should regulate any new publicly traded asset classes.
The SEC has no jurisdiction to regulate ether. The SEC’s regulatory powers are limited to securities, not commodities. Ether is a commodity, as confirmed by the CFTC, and the Ethereum blockchain is an internet protocol, not an investment scheme. As recently as October 2023, the SEC endorsed the CFTC’s classification of ether as a commodity by green-lighting ether ETFs tied to commodity futures that are regulated by the CFTC. This action by the SEC not only underscores the legal status of these ether futures contracts but also affirms ether’s standing as a commodity, aligning with the CFTC’s view. While ether is a commodity in which one can invest (like oil), it has far broader technological applications relating to the Ethereum blockchain.
The problem is, although the SEC affirmed the CFTC’s view of ether by publicly approving the ETFs in October 2023, in private the SEC has secretly been building an enforcement action to assert that ether is a security. It is taking two completely contradictory positions.
Furthermore, the SEC has also been covertly building a case to shut down applications that people around the globe rely upon to access and use the Ethereum blockchain – such as our MetaMask wallet. We aim to show that MetaMask is not a securities intermediary (i.e., a broker).
The facts are clear, the SEC has no jurisdiction to regulate Ether (a commodity), software interfaces built on Ethereum, or the Ethereum blockchain in general. Its attempt to do so is just the latest case of aggressive regulatory overreach by the agency, with the SEC trying to impose its own politicized agenda onto sectors far beyond U.S. capital markets.
What makes this case unique? Is the SEC not examining several crypto intermediaries?
This case is a response to a pattern of unwarranted SEC’s scrutiny of Consensys and its offering, but it does highlight broader SEC action that we feel showcases a clear ideological war on crypto.
In February of this year, Lejilex and the Crypto Freedom Alliance of Texas brought a complaint against the SEC on grounds of gross regulatory overreach. And in March, the DeFi Education Fund joined with Beba in a case against the SEC that, amongst other complaints, challenged the SEC’s “unwritten policy” on crypto rules as a violation of the Administrative Procedure Act. The case Consensys brings is the first to address the status of ether; this is a critically important component as ether has the potential to be a significant driver of the U.S. economy of the future. Unlawful SEC regulation, however, threatens to jeopardize this potential and impede the U.S.’s ability to use blockchain technology as the basis for countless new innovations and technologies.
The sector has had enough of the SEC’s aggressive regulatory overreach, and we are pleased to join others in standing up for the industry, other enterprises, and what is right.
Is this case about ether’s status as a commodity vs a security?
Our complaint is about the SEC’s gross regulatory overreach when it comes to interfering with the cryptocurrency and digital asset space. But ether’s status is a core component of the case. While long taking the position publicly that ether is a commodity, the SEC has secretly been targeting blockchain companies, including Consensys, and software developers in an investigation focused on Ethereum. It’s an abuse of power for a financial regulator to use its investigatory powers to mount an attack on technology, and we need the judicial branch to compel this rogue agency to follow the law.
The CFTC recognizes ether as a commodity, a stance the SEC validated as recently as October 2023. And given ether is a commodity, the applications that people around the globe rely upon to access and use the Ethereum blockchain – such as our MetaMask wallet – are not securities intermediaries (brokers).
Therefore, the SEC has no jurisdiction to regulate ether (a commodity), software interfaces built on Ethereum, or the Ethereum blockchain in general.
SEC regulation of Ethereum would jeopardize the U.S.’ ability to use blockchain technology as the basis for countless new innovations, technologies, and products that this next generation of the Internet will unleash.
What is your desired outcome from this litigation?
Consensys’ lawsuit seeks a declaration that (i) ether is not a security and that, accordingly, the SEC’s investigation into ether and Ethereum and any resulting enforcement actions exceed its regulatory authority; (ii) any enforcement action against Consensys premised on ether being a security or ether transactions being securities transactions would violate due process and fair notice; (iii) Consensys neither acts as a broker nor offers or sells securities through the Swaps and Staking functionality of its MetaMask wallet software; and (iv) any investigation or enforcement action against Consensys premised on it acting as a broker or offering and selling securities through its MetaMask software would exceed the SEC’s authority. Consensys further seeks an order enjoining the SEC from continuing to investigate or bringing an enforcement action with respect to its sales of ether and as to MetaMask.
How are regulators, in other international markets, approaching this matter?
The U.S. has been a standard-bearer for technological innovation and regulation since the breakout of the internet in the 1990s. Through its illegal overreach, the SEC risks destroying America’s position as a global technological leader by essentially ceding to foreign states the opportunity to use blockchain to contribute to an economy built off of a technological evolution of the internet.
Other regulators around the globe are approaching crypto and blockchain innovation in a far more pragmatic and optimistic manner than the U.S. BRICS countries are trying to move away from the Dollar by creating a new blockchain-based payment system and, in June 2023, the European Commission published a draft legislative proposal to develop a digital euro—potentially based on blockchain—as the eurozone central bank’s digital currency. On April 15, it was announced that Hong Kong regulators approved the launch of spot bitcoin and ether exchange-traded funds (ETFs).
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