Judge Tosses Consensys’ Suit Against SEC Over Ethereum, but MetaMask Drama Continues
In a twisty turn of events, a Texas federal judge has booted out a lawsuit brought by Consensys against the U.S. Securities and Exchange Commission (SEC) and its head honcho, Gary Gensler, along with other bigwigs.
This legal showdown focused on the SEC’s deep dive into Ethereum (ETH) and a Wells Notice concerning MetaMask, the snazzy crypto wallet by Consensys.
Consensys kicked things off by challenging the SEC’s sniffing around its Ethereum dealings and some bells and whistles of the MetaMask wallet. The regulator's sleuthing, which started in April 2022, eventually led to a Wells Notice in April 2024, hinting at possible enforcement actions for alleged rule-breaking.
Consensys fired back with a lawsuit, hoping to get a court to declare that ETH isn’t a security and that their transactions were all above board.
But on September 19, Judge Reed O’Connor said the SEC’s probe into Ethereum was a non-issue since Consensys had mentioned in July that the SEC had hit the brakes on its inquiry after giving the green light to spot Ethereum ETFs in May.
In response to the ruling, Consensys shared on X, “Sadly, the Texas court dismissed our lawsuit on procedural grounds without diving into the heart of our claims against the SEC.”
They also pointed out that the SEC dropped its ‘Ethereum 2.0’ probe after they filed the lawsuit, and the Texas court acknowledged that Consensys had already gotten the relief it sought on that crucial point for the Ethereum community.
Despite the setback, Consensys vowed to “keep fighting” for blockchain developers' rights in the U.S., hinting at a new battlefront against the SEC in Brooklyn.
Even though the SEC decided not to take action against Consensys for the Ethereum issue, they did slap the company with a case over its MetaMask Staking and Swaps service, accusing them of breaking federal securities laws.
This part of the saga is still up in the air. Judge O’Connor said this issue wasn’t ready for prime time, mainly because the SEC hadn’t made a final call. He also mentioned that more facts need to be sorted out before the court can jump in.
Since Consensys couldn’t pinpoint any final SEC action that would make their claim ripe for review and because delaying consideration doesn’t really harm them, the case isn’t ready for court.
He added that the Wells Notice doesn’t wrap up the SEC’s decision-making process nor set Consensys' legal rights or duties, pointing out that it doesn’t “impose legal consequences” on the firm.
