SEC Wins as Court Dismissed Consensys Lawsuit at First Hearing
A Texas federal judge has dismissed a lawsuit filed by blockchain firm Consensys against the Securities and Exchange Commission, along with its commissioners including Chair Gary Gensler. The ruling dealt a blow to the firm's challenge of the regulator over how Ethereum should be classified and whether its MetaMask wallet services are illicit.
Judge Reed O'Connor granted the motion on September 19, but the substance of his ruling was mostly procedural and did not touch on the merits of Consensys' claims.
In the lawsuit filed in April, the company had been seeking a court declaration that Ethereum is not a security, and, thus, its sales of ETH do not render Consensys a securities transaction. It also sought to prevent the commission from taking enforcement action against aspects of its MetaMask wallet software.
ConsenSys had claimed that the SEC was investigating Ethereum and contemplating bringing it under securities regulation, referring to a Wells notice given over swap and staking services of MetaMask.
However, Judge O'Connor rejected these, stating that "enforcement actions do not constitute final agency actions." He further explained that the Wells notice did not represent the culmination of the decision-making process of the Commission nor did it determine the legal rights and responsibilities of Consensys.
The judge went even further to declare that Consensys' claims about the investigation of ETH by the SEC were rendered moot. This, after Consensys in July filed to assert that the regulator had dropped the probe due to the approval of Ether exchange-traded funds in May.
Following the ruling of the court, Consensys expressed disappointment that it was a procedural dismissal and did not analyze the merits of its claims against the SEC.
The company has also emphasized the fact that the dropping of the "Ethereum 2.0" investigation by the SEC after the filing of the litigation was a recognition by the court of the substantive relief Consensys had asked on that important issue for the Ethereum ecosystem.
