Ethereum Developer Sues SEC...“Ethereum Securities Classification, Wall Street Conduct”
Ethereum developer Consensus filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) today. The complaint alleges that the SEC's recent overreaching investigation into whether Ethereum (ETH) is a security or not, and that the SEC has engaged in chilling behavior before taking control of the entire digital asset (cryptocurrency) industry. “Ethereum is not a security, and its actions to classify it as such tramples on Fifth Amendment rights and violates the Administrative Procedure Act,” the complaint states.
In fact, the SEC has been investigating the Ethereum Foundation since March over whether ETH is a security. In March, the SEC launched an investigation into Ethereum and the Ethereum Foundation over whether Ethereum should be classified as a security after Ethereum's 2022 transition to proof-of-stake (PoS), examining documents and data that could indicate a link between Ethereum and the Ethereum Foundation, according to Bloomberg.
The SEC sent a “wells notice” to the Ethereum Foundation on March 10, according to Consensus' complaint. A “wells notice” is an advance notice from the SEC to individuals and companies that the agency is seeking clarification on violations of its rules, signaling that the regulator is initiating proceedings against the company.
Consensus revealed that the SEC sought to charge the Ethereum Foundation with securities law violations, categorizing MetaMask Wallet as a “broker” and Ethereum as a “security. Consensus vigorously denies the SEC's allegations, stating that “MetaMask is a simple interface that neither holds nor trades investors' assets.”
Consensus pointed to the Hinman Speech and the U.S. Commodity Futures Trading Commission (CFTC) to emphasize that the SEC cannot classify Ethereum as a security. The Hinman speech is a 2018 speech by SEC Commissioner William Hinman in which he denied Ethereum's securities status, citing the decentralization of Ethereum's operating nodes. Meanwhile, the CFTC has been arguing for a commodity classification for Ethereum since 2022, citing the Responsible Financial Innovation Act. The Responsible Financial Innovation Act is considered the 'Draft US Digital Asset Regulation Bill' and has been referenced in the establishment of the proposed integrated digital asset regulation bill in the United States until recently.
For now, the SEC has declined to respond to Consensus' complaint.
