Crypto firm Consensys is suing the SEC over Ethereum and is asking the court to declare that ETH is not a security. This case mirrors the Ripple Labs case against XRP, where the SEC was forced to admit that XRP is not a security. Consensys is one of the major backers of the Ethereum blockchain. The lawsuit was filed in Texas federal court on Thursday.
Consensys seeks to divert from an impending lawsuit by the SEC against them over the MetaMask Wallet. The 34-page legal filing features dramatic language arguing that the SEC’s efforts against ETH are illegal and threaten overall blockchain technology. The debate on Ethereum’s digital token, Ether, being a security has been a key argument for the SEC, especially with Spot Ethereum ETF applications pending.
The SEC’s unlawful seizure of authority over ETH would spell disaster for the Ethereum network, and Consensys. Every holder of ETH, including Consensys, would fear violating the securities laws if they were to transfer ETH on the network,” the complaint states. “This would bring [the] use of the Ethereum blockchain in the United States to a halt, crippling one of the internet’s greatest innovations.”
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The SEC Continues Its Battle Against Ethereum And The Crypto Industry
The SEC is currently pursuing an aggressive enforcement battle against the cryptocurrency industry. SEC Chair Gary Gensler has unleashed multiple subpoenas, asking firms for documents related to the Ethereum blockchain. As a result, many in the industry have responded negatively to these efforts, saying that the initiative violates privacy and has been totalitarian.
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Furthermore, the Consensys complaint filed on Thursday reveals that the SEC issued a Wells Notice in early April. This describes a formal letter warning the agency intends to sue a firm. It often leads to a settlement soon after. The complaint adds that, in a related phone call, the SEC told Consensys that MetaMask was operating as an unlicensed broker-dealer. The SEC may follow up with a new lawsuit around the Wells Notice instead of resolving the lawsuit imposed by Consensys in court. However, their plan remains unknown.