A US District Court in Texas has thrown out a lawsuit by Ethereum-focused software developer Consensys against the US Securities and Exchange Commission (SEC).
In a Thursday ruling, the presiding judge, Reed O’Connor, dismissed the legal claims, citing that they were moot. The Texas court ruled that the US regulator had discontinued the pursuit of the claims Consensys stated in the lawsuit, hence the toss.
The MetaMask developers acknowledged the latest move in a tweet, describing the development as “unfortunate.” Consensys stated that the Texas court threw out the lawsuit without considering the “merits of the claims” against the securities watchdog.
Court Scraps April Lawsuit
In April, Consensys sued the US SEC for regulatory overreach in the cryptocurrency sector, particularly on the Ethereum network. The blockchain developer revealed that the Wall Street top regulator had issued it a Wells Notice and had started an investigation into what asset class Ethereum is.
Consensys requested that the court declare that Ether was not a security and prevent the SEC from taking legal action against its Web3 wallet, MetaMask. Eventually, the SEC sued Consensys for offering unregistered staking and brokerage services.
The case took a new twist in May when the regulator approved the Ethereum spot exchange-traded funds (ETFs). Following the approval, SEC’s claims that ETH was a security became contentious, forcing the watchdog to suspend its investigation into Ethereum 2.0.
Judge O’Connor ruled on Thursday night that Consensys’ lawsuit was no longer fit for judicial review. He claimed that the SEC’s Wells Notice does not pose legal consequences for Consensys, so the legal action was unarguable.
Consensys Vows to Keep Fighting
Meanwhile, the MetaMask developer has vowed to continue opposing the SEC’s clampdown on the crypto industry. Consensys particularly pointed to its ongoing legal battle with the securities watchdog on MetaMask’s staking activities.
The SEC claimed that MetaMask offered brokerage and staking services to US citizens without due registration. It also alleged that staking activities exposed investors to magnanimous risk while providing little protection.
Notably, crypto firms have begun challenging the securities regulator. In another lawsuit, Kraken filed for a jury trial in its legal battle with the SEC. The California-based exchange denied claims that it offered unregistered securities, stating that Cardano and other assets mentioned were not securities.
Coinbase took a similar stand against the SEC earlier, claiming it failed to comply with its Freedom of Information (FOIA) request. The largest US-based exchange sued the regulator for enacting certain regulations to hamper the crypto industry’s growth.
Consensys Remains Steadfast
Meanwhile, according to an email shared with The Crypto Basic, a Consensys spokesperson reiterated:
“In April 2024, Consensys filed a lawsuit to protect the Ethereum ecosystem from the SEC’s regulatory overreach and stand up for the industry that has been subject to the agency’s reckless enforcement agenda. Unfortunately, the Texas court today dismissed our lawsuit on procedural grounds without looking at the merits of our claims against the SEC.
Our suit against the SEC laid bare the overzealous investigation of Ethereum, and policymakers and the public at large voiced deep concern over the SEC’s investigation of blockchain software development.
In a significant win for the industry, the SEC dropped its “Ethereum 2.0” investigation after our litigation was filed, and the Texas court today recognized that the SEC already gave Consensys the relief it sought on that critical issue for the Ethereum ecosystem.
Outside of court, we have also seen signs of what could be a momentous step change in Washington’s sentiment towards cryptocurrencies and digital assets during a crucial period for U.S. politics. We are on the right path, but must remain vigilant. Consensys is resolved to keep fighting for the rights of blockchain developers in the U.S. as we contest the SEC’s action in Brooklyn.”
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