US Federal Judge Dismisses ConsenSys Lawsuit Against SEC

Highlights:

• The Texas court dismissed Consensys’ lawsuit against the SEC on procedural grounds.
• Consensys aimed to clarify Ethereum’s status and protect MetaMask services. 
• ConsenSys plans to continue fighting for blockchain developers’ rights.

The United States District Court for the Northern District of Texas dismissed a lawsuit filed by Ethereum software giant ConsenSys against the U.S. Securities and Exchange Commission (SEC) and its five Commissioners, including Chair Gary Gensler, on Thursday. This followed a lengthy legal battle to clarify the status of Ethereum and similar software products.

BREAKING: TEXAS CONSENSYS LAWSUIT AGAINST SEC AND GARY GENSLER DISMISSED BY COURT PER BLOCKWORKS

— BSCN Headlines (@BSCNheadlines) September 19, 2024

Legal Battle Over Ethereum and MetaMask

In April, ConsenSys filed a lawsuit against the SEC, seeking a court declaration that Ether (ETH) is not a security and that “ConsenSys’s sales of ETH are not sales of securities.” The suit aimed to block the SEC from pursuing enforcement action against its MetaMask wallet, ConsenSys’ popular cryptocurrency wallet with over 30 million monthly active users.

ConsenSys also alleged that the SEC initiated an investigation into Ethereum and intended to regulate it as a security, highlighting that the agency had issued a Wells notice concerning MetaMask’s swap and staking services.

In June, ConsenSys announced that the SEC had closed its investigation into Ethereum, a move hailed as a “major win” for the industry. In July, the SEC filed a lawsuit against ConsenSys in the U.S. District Court for the Eastern District of New York for failing to register as a broker in connection with its MetaMask Swaps service. ConsenSys preemptively sued the SEC after receiving a Wells notice regarding MetaMask.

Judge Dismisses Consensys’ Claims, Citing Lack of Final Agency Action

In a September 19 order, Judge Reed O’Connor noted that ConsenSys had not identified the final agency action required. As a result, the MetaMask claim was deemed ineligible for judicial review. The actions cited by ConsenSys, such as a Wells Notice and SEC enforcement against another company, were not considered final.

O’Connor dismissed Consensys’ claims regarding the SEC’s investigation into ETH as moot, following the firm’s statement in July that the regulator had ended its probe after approving Ether exchange-traded funds (ETFs) in May.

Further, the judge wrote:

“Because Plaintiff has not identified final agency action that would render the claim fit for judicial review and because withholding consideration subjects Plaintiff to scant, if any, hardship, the claim lacks a ripe case or controversy.”

Consensys Vows to Fight On After Texas Court Dismissal

On September 19, ConsenSys stated in a post that the Texas court dismissed their lawsuit. The dismissal was based on procedural grounds and did not address the merits of their claims against the SEC.

The firm said:

“The SEC dropped its “Ethereum 2.0” investigation after our litigation was filed, and the Texas court today recognized that the SEC already gave Consensys the relief it sought on that critical issue for the Ethereum ecosystem.” 

Consensys said it would “keep fighting for the rights of blockchain developers” in its ongoing case with the SEC. The company is anticipated to file a motion to dismiss the case.

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