A judge has ruled that the company has no foundation to target the securities regulator
A Texas federal judge has ruled against blockchain development firm Consensys in its lawsuit against the US Securities and Exchange Commission (SEC) and its five commissioners, including SEC Chair Gary Gensler. The lawsuit, originally filed in April, sought a court declaration that Ether (ETH) is not a security and aimed to prevent the SEC from pursuing enforcement actions related to Consensys’ MetaMask wallet software. The SEC later initiated enforcement actions in June, further complicating the situation.
Consensys argued that the SEC was conducting an investigation into Ethereum and potentially classifying it as a security. This argument was bolstered by a Wells notice the SEC issued to the firm regarding MetaMask’s swap and staking features, suggesting potential regulatory actions against the platform.
In April 2024, Consensys filed a lawsuit to protect the Ethereum ecosystem from the SEC’s regulatory overreach and stand up for the industry that has been subject to the agency’s reckless enforcement agenda.
Unfortunately, the Texas court today dismissed our lawsuit on…
— Consensys (@Consensys) September 19, 2024
However, Judge Reed O’Connor dismissed Consensys’ claims related to MetaMask. He stated that the Wells notice issued by the SEC does not represent a final decision by the agency, nor does it impose any legal consequences on the company. O’Connor explained that such notices are merely preliminary steps in the regulatory process and do not establish definitive legal obligations.
The court also dismissed Consensys’ claims about the SEC’s investigation into Ether as irrelevant. This decision came after Consensys revealed in July that the SEC had dropped its investigation following the approval of Ether exchange-traded funds (ETFs) in May. As a result, the court found no grounds to continue the case on this issue.
Despite the dismissal, Consensys remains determined to contest the SEC’s enforcement actions over its MetaMask software. The company argues that the SEC’s claims of unregistered broker operations and securities sales through MetaMask Swaps are unfounded. Consensys plans to file a motion to dismiss this part of the case as well, signaling ongoing legal battles between the blockchain firm and the regulatory body.
