In an unexpected legal twist, a federal judge in Texas has thrown out a case brought by blockchain company Consensys against the SEC, which also named the commission’s members, including Gary Gensler, the Chairman.
Insights into Consensys’ Legal Action
The lawsuit, initiated in April in the Northern District of Texas, alleged that the SEC was trying to dominate the cryptocurrency field by taking aggressive enforcement measures.
The firm contended that the SEC’s actions, including its focus on Ethereum [ETH] as a security, contradicted previous statements. They highlighted regulatory rulings dating back to 2018 that had deemed ETH not a security.
Furthermore, Consensys claimed that the SEC had begun an inquiry into Ethereum, indicating its intention to regulate the asset.
In addition, they pointed out that a Wells notice had been issued by the SEC regarding MetaMask’s swap and staking functions, raising concerns about a potential change in regulatory position.
Dismissal of the Lawsuit by O’Connor — Reasons Behind It
Judge Reed O’Connor dismissed Consensys’ claims regarding MetaMask, stating on September 19 that “enforcement actions do not constitute final agency actions.”
He elaborated, stating,
“Given that the Plaintiff has not pinpointed final agency action that would make the claim suitable for judicial review and since refraining from consideration does not impose significant hardships on the Plaintiff, the claim lacks a ripe case or controversy.”
Additionally, Judge O’Connor emphasized that the Wells notice from the SEC does not mark the end of the agency’s decision-making process or define the legal rights or obligations of Consensys.
He clarified that it does not enforce any legal ramifications on the company.
O’Connor also dismissed Consensys’ assertions concerning the SEC’s Ethereum investigation.
He classified the claims as “irrelevant” after Consensys disclosed in July that the SEC had terminated its investigation after the approval of Ether exchange-traded funds (ETFs) in May.
Consensys Voices Frustration
Following the ruling, Consensys conveyed its reaction on X (previously Twitter), expressing:
“Regrettably, the Texas court has dismissed our lawsuit on procedural grounds without examining the substance of our claims against the SEC.”
The company indicated that its lawsuit against the SEC had brought to light what they interpreted as an excessive investigation into Ethereum.
Prior to this, they had applauded the SEC’s choice to drop its investigation into “Ethereum 2.0,” perceiving it as a significant victory for the sector and a recognition by the Texas court that the relief sought by the company had already been achieved.
Furthermore, they noted a potential shift in Washington’s approach to cryptocurrencies and digital assets, indicating a positive evolution during a critical juncture in U.S. politics.
Faced with this unforeseen outcome, the company reiterated its commitment, stating,
“Consensys is determined to continue advocating for the rights of blockchain developers in the U.S. as we challenge the SEC’s actions in Brooklyn.”
Therefore, it remains to be seen whether Consensys will fulfill expectations by filing a motion to dismiss the case or opt to continue contesting the SEC.