Consensys’s Lawsuit Against SEC: Challenging Gensler’s Authority? Is ETH a security?

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Consensys has taken legal action against the SEC, aiming to settle whether staking turns ether into a security and to halt what it deems “regulatory overreach.” The lawsuit, filed in a Texas federal court on Thursday, seeks to block an imminent SEC action against its MetaMask wallet and affirm that ether is not a security.

The complaint criticizes the SEC for what Consensys perceives as excessive regulation, disputes its classification of ETH as a security, and accuses the SEC of violating due process by lacking fair notice. It highlights the SEC’s historical stance, alongside the CFTC, that ETH is not a security.

Moreover, the lawsuit challenges the SEC’s recent scrutiny of Ethereum’s shift to proof of stake in 2022, a move Consensys CEO Joseph Lubin calls “preposterous.”

Laura Brookover, Senior Counsel & Head of Litigation and Investigations at Consensys, discusses the lawsuit’s implications for Ethereum and the broader crypto landscape in the US. Highlights include the reasons behind Consensys’s legal action, the quest for a judicial declaration on ETH’s security status, and the implications of the SEC’s Wells Notice to Consensys regarding its MetaMask wallet. Brookover also explores the significance of the major questions doctrine in the SEC’s regulatory actions, the relevance of Hinman’s speech, and the potential motivations behind the SEC’s resistance to ether spot ETFs.

The discussion delves into the industry’s growing frustration with the SEC’s approach and the strategic choice of Texas as a jurisdiction for legal action. The outcome of Consensys’s lawsuit could have significant implications for the crypto industry, with Brookover outlining the next steps in the case.

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