Agreement sues SEC over attempts to regulate Ethereum as a security

Ethereum software giant Consensus filed a lawsuit against the Securities and Exchange Commission (SEC) on Thursday.

Consensus, the Ethereum startup behind the popular Metamask wallet and Infura infrastructure platform, says the SEC is overreaching in its efforts to regulate Ethereum under current chairman Gary Gensler. The official of the agency previously said that in 2018, ETH should not be considered a security.

“The US Securities and Exchange Commission (“SEC” or “the Commission”) wants to regulate ETH as a security, even though ETH does not possess any security features – and even though the SEC has previously told the world that ETH is not a security, and is not within the SEC's legal jurisdiction.” , the 34-page complaint reads.

The complaint also notes that the SEC filed Consensys with Wells' announcement on MetaMask. The Wells Notice is a letter sent in advance of the proposed regulatory action. As a result, Consensys chose to file a preliminary lawsuit against the agency, seeking a declaration that Ethereum is not really a security.

Ethereum is the blockchain that powers ETH, the second largest cryptocurrency by market cap. Its network is used by developers to build decentralized applications.

“The SEC seeks to achieve this regulatory dominance by imposing temporary enforcement actions against Consensys et al.: The enforcement actions punish Consensys for accepting and implementing years of government assurances that ETH is not a security,” the lawsuit reads.

The SEC's stance on Ethereum as a security is important, as the regulator has gone after several crypto companies it believes are breaking rules for selling unregistered securities.

If the SEC decides to designate Ethereum as a security instead of a commodity, several crypto companies are allegedly violating US securities laws. Other regulators, such as the Commodity Futures Trading Commission (CFTC), have said that Ethereum is a commodity.

“The lawsuit we filed today is aimed at protecting access to the thousands of developers, market participants and institutions that have stakes in the world's second largest blockchain,” said the Ethereum founder and Consensus founder and CEO. Joe LubinIn a press release.

“The SEC cannot be allowed to arbitrarily expand authority to regulate what is clearly already there and to regulate what the SEC itself has already entered into,” Lubin continued. “We hope the case will bring attention to — and finally put an end to — the SEC's careless approach and restore much-needed regulatory certainty and sanity to Web3 Technologies.”

Consensus and the SEC did not immediately respond to Decrypt's request for comment.

The lawsuit comes after the Ethereum Foundation, which supports the decentralized blockchain network, revealed in February that it had received a request from an undisclosed “government authority.” Fortune reported in March that the SEC is behind the request.

Earlier this month, leading Ethereum decentralized exchange Uniswap announced that it had received a Welsh notice ahead of an expected enforcement action by the SEC.

(Disclosure: Consensys is one of 22 investors in Decrypt)

Edited by Andrew Hayward.