A federal judge in Texas has dismissed a lawsuit brought by Consensys, a blockchain development firm, against the U.S. Securities and Exchange Commission (SEC) and its Chair, Gary Gensler. The lawsuit addressed the SEC’s investigations into Ethereum (ETH) and a Wells Notice related to the MetaMask cryptocurrency wallet, which is developed by Consensys.
Overview of the Case
Consensys filed the lawsuit in response to the SEC’s scrutiny of its Ethereum transactions and certain features of the MetaMask wallet. This investigation, which began in April 2022, resulted in a Wells Notice issued in April 2024, signaling potential legal actions against the company for alleged violations of federal securities laws.
In its legal challenge, Consensys sought a court ruling to clarify that ETH is not a security and that its asset transactions do not qualify as sales of securities. However, in his ruling on September 19, Judge Reed O’Connor declared that the claims regarding Ethereum were “moot,” as Consensys had previously noted that the SEC halted its investigation after approving spot Ethereum ETFs in May.
In a statement, Consensys expressed disappointment over the dismissal, indicating that the court did not address the substantive issues raised in their claims. They also pointed out that the SEC had discontinued its ‘Ethereum 2.0’ investigation after the lawsuit was filed, which provided the relief they were seeking regarding that matter.
Ongoing MetaMask Investigation
Although the SEC has stepped back from enforcement actions concerning Ethereum, it has initiated an investigation into Consensys’ MetaMask Staking and Swaps services. The SEC alleges that these features breach federal securities laws, leaving this part of the case unresolved. Judge O’Connor stated that the matter is not yet ready for judgment because the SEC has not finalized its agency action, and further developments are needed.
He noted that the Wells Notice does not conclude the agency’s decision-making process or define the plaintiff’s legal rights, meaning it does not impose any legal obligations on Consensys at this point.
As the situation unfolds, Consensys has reaffirmed its commitment to advocate for blockchain developers’ rights in the U.S. and hinted at potential further actions against the SEC in Brooklyn.
