SEC Faces Lawsuit Over Ethereum Classification

In a bold move, crypto firm Consensys has filed a lawsuit against the U.S. Securities and Exchange Commission (SEC), seeking to block the agency from classifying Ether (ETH), the native cryptocurrency of the Ethereum blockchain, as a security.

The lawsuit, filed in a Texas federal court, mirrors the high-profile case between the SEC and Ripple Labs over the XRP token, where the SEC was ultimately forced to admit that XRP is not a security.

Consensys, a major backer of the Ethereum network, argues that the SEC’s efforts to assert authority over ETH would have disastrous consequences for the entire Ethereum ecosystem. The 34-page legal filing contends that such a move would “bring the use of the Ethereum blockchain in the United States to a halt, crippling one of the internet’s greatest innovations.”

The lawsuit comes as the SEC continues its aggressive enforcement campaign against the cryptocurrency industry. SEC Chair Gary Gensler has issued multiple subpoenas to firms, demanding documents related to the Ethereum blockchain.

The industry has responded with growing frustration, accusing the SEC of violating privacy and adopting a “totalitarian” approach.

Interestingly, the Consensys complaint reveals that the SEC had issued a Wells Notice to the firm in early April, signaling the agency’s intent to sue. The complaint also states that the SEC had informed Consensys that its MetaMask wallet was operating as an unlicensed broker-dealer.

This latest legal battle underscores the high stakes in the ongoing tug-of-war between the SEC and the crypto industry. The outcome of the Consensys lawsuit could have far-reaching implications for the future of Ethereum and the broader cryptocurrency landscape.