Consensys’s Lawsuit Against The SEC and the Major Questions Doctrine

With its lawsuit, Consensys aims to settle the question of whether staking turned ether into a security, and to hopefully put an end to what it calls the SEC’s “regulatory overreach.” 

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On Thursday, Consensys sued the U.S. Securities and Exchange Commission (SEC) in a Texas federal court, seeking to prevent an impending SEC action against its MetaMask wallet and to clarify that ether is not a security.

The complaint calls out the agency for what Consensys describes as “regulatory overreach,” challenges its notion that ETH is a security, and says the SEC has violated the Constitutional requirement of fair notice under the due process clause. It notes that for years, the SEC and its sister agency, the Commodity Futures Trading Commission, took the position that ETH is not a security.  

The lawsuit also challenges the SEC’s recent focus on Ethereum's switch to proof of stake in 2022 as a basis for increased scrutiny, a stance Lubin deemed "preposterous."

Laura Brookover, Senior Counsel & Head of Litigation and Investigations at Consensys, joined Unchained to unpack the lawsuit and what it means for the future of Ethereum and overall crypto in the US.

Show highlights:

• Why Consensys sued the SEC and why Brookover feels like the SEC has gone too far
• How they are looking for a Judge to declare that the ETH is not a security
• Whether the switch to proof of stake turned ETH into a security
• Why the SEC issued Consensys a Wells Notice, with one potential allegation being that it is operating an unregistered securities broker through its MetaMask wallet
• How the major questions doctrine applies to what the SEC is doing in the industry, according to Brookover
• Why Hinman’s speech is still relevant today, even after 6 years
• Whether the moves by the SEC are related to a motivation to deny ether spot ETFs
• How the several cases against the SEC show that the industry “has had enough”
• Whether Texas is a jurisdiction favorable to crypto, given that many lawsuits are being filed there
• The implications of a Consensys victory for the industry and what the next steps in the case are

Thank you to our sponsors!  iTrustCapital  | Polkadot

Guest | Laura Brookover, Senior Counsel & Head of Litigation and Investigations at Consensys

Links | 

The lawsuit: 

Fortune: SEC sued over Ethereum, crypto firm asks court to state token is not a security

Consensys’s complaint

Bill Hughes’ thread on why Consensys sued the SEC

Consensys is suing the SEC to defend the Ethereum ecosystem

Hinman speech

CryptoLaw: The Hinman Speech Documents

Major questions doctrine

Unchained: Why the SEC vs. Ripple Order Is Now About 2 Things: Coinbase and Congress

Reuters: SEC argues Coinbase crypto case not barred by ‘major questions’ doctrine 

Other SEC cases:

Coinbase

Unchained: 

Why the SEC’s Case Against Coinbase Is So Significant for Crypto

Court Rejects Coinbase’s Bid to Dismiss SEC Charges Against It

Uniswap

Unchained: 

Gary Gensler’s Case Against Uniswap: Does the SEC Even Stand a Chance?

SEC Puts DeFi in Its Sights With Potential Uniswap Suit

Uniswap Blog Post on the Wells notice

Marvin Ammori Thread on Wells notice

Ethereum Foundation

Unchained:

SEC Investigating Ethereum Foundation Regarding Proof-of-Stake Transition: Report

The Real Reason Why the SEC Might Be Going After Ethereum

Debt Box

Unchained: SEC Sanctioned for ‘Abuse of Power’ in Debt Box Lawsuit

Beba

DeFi Education Fund and Beba sue SEC over airdrop policies

Lejilex

Lawsuit document

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Unchained Podcast is Produced by Laura Shin Media, LLC.  Distributed by CoinDesk. Senior Producer is Michele Musso and Executive Producer is Jared Schwartz. 

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