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ConsenSys has sued the SEC and its five commissioners over plans to regulate ETH as a security, claiming it would have a catastrophic effect on the internet and innovation in the United States. The company also warned that changing the commission’s stance on ETH after the company had already established its business based on regulatory precedents could have potential consequences, citing the SEC’s record and statements by Chairman Gary Gensler.
Impact on the Ethereum Network
ConsenSys stated that if the SEC unlawfully seized authority over ETH, it would have a catastrophic impact on the Ethereum network. The company emphasized that if the commission changed its stance on ETH, every ETH holder would be affected.
If ConsenSys were to move ETH across the network, they would fear violating securities laws, and the ability for new users to acquire ETH to use decentralized applications and services on Ethereum would be eliminated. Consequently, the use of the Ethereum blockchain in the United States would cease, undermining one of the internet’s most significant innovations.
About the Lawsuit
The lawsuit specifically targets inconsistent statements made by Gensler regarding Ether and all five SEC commissioners in their official capacity. At a hearing in April 2023, Gensler evaded questions about whether ETH falls under the commission’s regulatory purview, despite stating in 2018 that ETH was not a security.
According to ConsenSys, the company received three subpoenas in 2023, requesting information related to the acquisition, holding, and sale of ETH.
The company reiterated that the ongoing efforts by the U.S. Securities and Exchange Commission to classify Ether as a security would harm companies trying to operate sincerely according to regulatory guidelines.
Demands for Declaration
The company has requested the court to declare that “under the Securities Act, ETH is not a security, and the actions of ConsenSys in selling ETH do not fall within the scope of securities sales.” The relief request was made in an official capacity.
ConsenSys filed the lawsuit in Texas, where the company is headquartered in Fort Worth. The federal district in the state is also a hotbed for legal affairs related to cryptocurrencies.
The SEC’s efforts to expand its dealer rules led to a lawsuit filed by the Texas Blockchain Association and the Cryptocurrency Freedom Alliance on April 23. However, in February, the Texas Blockchain Council and Riot Platforms filed a lawsuit against cryptocurrency miners over information on cryptocurrency energy usage.
As of the publication of this article, the SEC has not yet sued ConsenSys, but Wells notices can sometimes indicate that the commission plans to take enforcement action. The SEC is involved in civil cases against Coinbase, Binance, and Ripple and recently concluded a lawsuit trial against Terraform Labs and Do Kwon.
Summary
Commissioners discussed plans to regulate ETH as a security. The lawsuit specifically targets inconsistent statements made by Gensler regarding Ether and all five SEC commissioners in their official capacity. ConsenSys filed the lawsuit in Texas, where the company is headquartered in Fort Worth.
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