ConsenSys, the blockchain company known for its Ethereum infrastructure projects like MetaMask, encountered a setback in its legal battle against the U.S. Securities and Exchange Commission (SEC).
The company had initially sued the SEC, alleging that the regulator’s investigation into Ethereum, particularly focusing on Ethereum 2.0, was unwarranted. ConsenSys aimed to establish that Ethereum’s native token, ether (ETH), shouldn’t be classified as a security.
However, a Texas judge ruled against ConsenSys, dismissing the lawsuit due to the SEC’s decision to abandon its Ethereum investigation. Judge Reed O’Connor of the U.S. District Court for the Northern District of Texas reasoned that without an active investigation, ConsenSys had no grounds to pursue the lawsuit.
This dismissal follows the SEC’s quiet closure of its Ethereum probe earlier this year. ConsenSys celebrated this development, highlighting that the SEC’s withdrawal of the investigation was a victory for the blockchain industry.
While the SEC has remained silent about the judge’s decision or the lawsuit’s dismissal, the outcome reflects broader concerns within the blockchain industry regarding regulatory overreach. ConsenSys argued that their lawsuit exposed the SEC’s overly aggressive approach to investigating Ethereum.
Initially, ConsenSys sought legal recognition that ETH is not a security and that MetaMask doesn’t operate as a broker under federal law. The company also maintained that its staking services didn’t violate securities regulations.
Although the Ethereum investigation was dropped, the SEC proceeded with charges against ConsenSys in June, accusing the company of operating MetaMask as an unregistered securities broker. Despite these charges, the SEC has remained relatively quiet about Ether’s legal status. However, the regulator recently reached a settlement with trading platform eToro, permitting it to continue listing ETH in the U.S.
The ongoing debate over the legal status of Ethereum and other crypto projects will be a central topic at Benzinga’s upcoming Future of Digital Assets event on November 19. Key players in the blockchain space will gather to discuss the intersection of regulation, technology, and innovation.
