The company claims the SEC plans to treat Ethereum as a security and that the agency is attempting an ‘unlawful power grab’ through enforcement actions.
Blockchain company Consensys has filed a lawsuit against the US Securities and Exchange Commission (SEC) for allegedly overreaching in its plans to regulate the Ethereum platform.
Ethereum is a decentralised blockchain and development platform, which Consensys claims is – or will be – the foundation of “countless” new web3 products and technologies.
The company alleges that the SEC is attempting an “unlawful power grab” through enforcement actions against Consensys and possibly other blockchain companies using Ethereum. Consensys also claims that Ether – the native cryptocurrency of the Ethereum platform – is a commodity and not a security.
The blockchain company claims apps that allow people to make transactions using Ethereum are not securities brokers and “therefore cannot be regulated by the SEC”.
“If allowed to expand its regulatory purview, the SEC would effectively destroy value for hundreds of millions of ether holders and bring use of the Ethereum blockchain in the United States to a halt, crippling the technological evolution of the internet,” the company claims.
The complaint wants a court to agree with Consensys’ claims that the SEC has no legal authority to regulate ether, software interfaces built on Ethereum or “the Ethereum blockchain in general”. This complaint has been filed in a US district court in Texas.
The SEC did not respond to a request for comment from Coindesk on the new Consensys lawsuit.
Crypto crackdown
The SEC has been cracking down on various crypto trading platforms in the US in recent years. The US agency claims that digital assets such as cryptocurrencies are subject to US securities laws because they are investment contracts. Critics of the SEC claim there the regulations around digital assets in the US are unclear.
Last year, the SEC sued both Coinbase and Binance, claiming the crypto exchanges had acted unlawfully in the country. Towards the end of 2023, Binance and its CEO Changpeng Zhao plead guilty to US charges and the crypto exchange agreed to pay more than $4bn to resolve an investigation.
Last month, the SEC scored a victory in its lawsuit against Coinbase, when a judge ruled that its claim that the cryptocurrency exchange engaged in unregistered sales of securities could be heard by a jury at trial.
The SEC is facing a hit from recent criticisms, however. Last week, two SEC lawyers resigned after a US judge sanctioned the regulator for “gross abuse” of power in a crypto case, Bloomberg reports.
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