[Consensys to SEC, Gary Gensler: Stay in your lane]
Consensys has strongly opposed the U.S. Securities and Exchange Commission’s (SEC) recent move to classify Ethereum as a security, arguing that the move stifles innovation and harms developers and investors who rely on Ethereum’s decentralized nature. Consensys has filed a lawsuit with the SEC challenging its classification of Ethereum.
Consensys pointed out that Ethereum’s change from proof of work (PoW) to proof of stake (PoS) should not define it as a security. The company emphasizes that whether an asset is a security should be determined based on its decentralization and nature, rather than relying on its consensus mechanism. Consensys said the move to PoS actually furthers Ethereum’s decentralization, in stark contrast to the SEC’s view.
In addition, Consensys emphasized that treating Ethereum as a security will have a serious impact on the U.S. market, isolate U.S. investors and developers, and put the United States at a disadvantage in the global digital economy. The company mentioned that if the SEC's regulations were implemented, it would stifle innovation and allow the rest of the world to overtake the United States.
Consensys’ legal defense cited heavily historical precedent, including former SEC director William Hinman, who made it clear that Ethereum was not a security. At the same time, the company also pointed out that the Commodity Futures Trading Commission (CFTC) has consistently regarded Ethereum as a commodity, further challenging the SEC’s decision.
The outcome of the lawsuit will set an important precedent for cryptocurrency regulation, potentially limiting the scope of the SEC’s intervention and underscoring the need for a clear and consistent regulatory architecture. This is not only about the future of Ethereum, but also about the critical battle to protect technological innovation from inappropriate regulatory expansion. Consensys argued that the SEC should focus on its core responsibility - securities regulation, rather than intervening in the software-based innovation industry.
