SEC Targets ETH, MetaMask Wallet; Developer ConsenSys Countersues SEC

The Ethereum infrastructure developer Consensys, after receiving a Wells Notice from the SEC, decided to proactively sue the SEC. The lawsuit also revealed that the SEC had been investigating Consensys' product MetaMask for several years.

SEC Targets ETH and MetaMask

ConsenSys received a Wells notice from the SEC on April 10th, and according to the complaint filed on April 25th, ConsenSys has the following demands:

1. Declare in federal court that ETH is not a security.

2. Assert that MetaMask's staking services do not violate securities laws.

3. Argue that MetaMask is not a broker under federal law.

The complaint emphasizes that allowing the SEC to unlawfully control ETH would have disastrous consequences for the Ethereum network and ConsenSys.

SEC's Early Moves, ConsenSys Receives Seven Subpoenas

ConsenSys stated that it has been receiving subpoenas from the SEC since 2022:

• April 2022: Investigation into MetaMask.

• September 2022: Allegations of illegal activity in MetaMask's staking services.

• 2023: Three subpoenas.

• One each in March and April 2024.

ConsenSys is seeking an injunction from the federal court to prevent the SEC from investigating and taking any enforcement actions against MetaMask's Swaps or Staking services, emphasizing:

MetaMask wallet merely serves as an interface, neither holding users' digital assets nor executing any transaction functions.

ConsenSys released the following statement.

Today, Consensys took an important step towards preserving access to ether and by extension the Ethereum blockchain in the U.S. We are suing the SEC and fighting back against its overzealous regulatory overreach. You can find more of my thoughts here: https://t.co/VmvOsrCxjw… https://t.co/5IubZo69FW

— Joseph Lubin (@ethereumJoseph) April 25, 2024

ConsenSys Refers to Past Precedents

ConsenSys referenced former SEC director Bill Hinman's 2018 speech claiming Ethereum is not a security, and mentioned that the U.S. Commodity Futures Trading Commission (CFTC) also has regulatory authority over Ethereum, emphasizing that ConsenSys developed its business in agreement with regulatory agencies.

SEC's attempt to seize regulatory control over Ethereum exceeds the scope of authorization granted by Congress.

According to CoinDesk, Terraform Labs and Coinbase have presented similar arguments in lawsuits with the SEC, but two judges have already dismissed them, stating that cryptocurrencies are not bound by this principle.

Representatives from the SEC declined to comment on the lawsuit.