Consensys takes to court that “Ethereum (ETH) is not a security issue”

• Consensys has sued the SEC for wanting to take action against the firm for its MetaMask products
• The blockchain company has also asked the court to declare that Ethereum is not a security.

In a new move, Consenys, a blockchain software technology company, has taken the first step to clarify Ethereum’s status as “not a security.” The blockchain company, founded by Ethereum co-founder Joseph Lubin, has sued the United States Securities and Exchange Commission (SEC) and its five commissioners.

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A court document reveals that the SEC had issued the company a Wells Notice on April 10, notifying the company of its intention to take enforcement action. The action concerned MetaMask’s product services: MetaMask Swap and MetaMask Stake. MetaMask is a cryptocurrency wallet developed by Consensys, which focuses on the Ethereum blockchain.

The SEC claimed that the products violated the Securities Act by acting as unregistered broker-dealers. The company, however, responded to this argument by stating that the Ethereum wallet was just an interface, adding that it does not contain digital assets or process transactions.

Ethereum: to be a value or not to be a value

The legal document also warns about the commission’s changing position on the status of Ethereum. The commission had previously stated that ETH was not a security. Even the Commodities and Futures Trading Commission (CFTC) backed this claim, stating that ETH was under its jurisdiction as it was classified as a commodity.

While the CFTC continues to stand firm on the matter, the same cannot be said for the SEC. In recent months, the SEC has reversed its position. Additionally, the commission has declared Laying the groundwork to mark the second-largest cryptocurrency by market capitalization as a security.

Addressing this issue, Consensys’ lawsuit said:

“The SEC’s land grab also violates fundamental principles of due process and fair notice. Essential to due process is the “fundamental principle. . . that the laws that regulate persons or entities must provide fair notice of prohibited or required conduct.”

Furthermore, the blockchain company stated that it “built its business around the Ethereum blockchain (…) years after the SEC assured the public that it viewed ETH as outside its domain.” The lawsuit further added that “Consensys has done so based on the SEC and CFTC’s repeated representations that ETH is not a security.”

Through this lawsuit, the company wants the court to declare that “ETH is not a security under the Securities Act and that sales of ETH by Consensys are not sales of securities under the Securities Act.”

He also wants the court to declare that an enforcement action against the company based on the security status of ETH is an overreach of authority. The firm is also seeking to have a case against MetaMask deemed overreach and prohibit the SEC from “conducting any investigation or enforcement action based on ETH transactions being securities transactions.”

This is an automatic translation of our English version.