Crypto Firm Sues SEC to Fend Off Oversight of Ethereum

Madlin Mekelburg and Olga Kharif, Bloomberg News

The US Securities and Exchange Commission headquarters in Washington, DC.

, Bloomberg

(Bloomberg) -- Crypto software firm Consensys sued the US Securities and Exchange Commission in an effort to fend off regulation of the Ethereum blockchain and push back against what it called the agency’s “campaign to seize control over the future of cryptocurrency.”

Consensys says in a lawsuit in federal court in Texas Thursday that if the SEC is permitted to exert authority over Ethereum and its digital token Ether, it would bring the blockchain to a halt, “crippling one of the internet’s greatest innovations.”

The lawsuit comes amid growing scrutiny of Ethereum by the SEC. In March, the agency demanded information from various companies as part of a review of aspects of Ether, the world’s second biggest cryptocurrency.

Consensys founder Joseph Lubin said in a statement that the SEC investigations into the company and others that contribute to the Ethereum codebase are “only accelerating.”

“They’ve made extensive requests for documents and testimony regarding our involvement with the code and the asset,” said Lubin, who was also a co-founder of Ethereum blockchain. “Absent any indication from the SEC otherwise, we have no reason but to believe an action against Consensys regarding Ether to be imminent.”

Consensys is asking the court to rule that the token is not a security and isn’t under the authority of the SEC. On Thursday, Consensys disclosed it received a Wells notice from the SEC related to its MetaMask wallet.

The SEC declined to comment on the lawsuit. The Ethereum Foundation, a non-profit supporting the blockchain, didn’t immediately return a request to comment.

SEC Chair Gary Gensler has said many digital assets are unregistered securities subject to SEC rules, but he has not specified if Ether is part of that group. Bitcoin, the world’s largest digital asset, is the only cryptocurrency that Gensler has definitively said isn’t a security in his view.

The case is Consensys Software Inc. vs. SEC, 4:24-cv-00369, US District Court, Northern District of Texas (Fort Worth).

--With assistance from Muyao Shen.

(Adds statement from Consensys founder starting in fourth paragrapgh.)