A federal judge in Texas dismissed a lawsuit brought by Consensys against the U.S. SEC and its Chair, Gary Gensler.
This case focused on the SEC’s investigation into Ethereum and its issuance of a Wells Notice concerning the MetaMask wallet.
Consensys’ lawsuit against the SEC
The lawsuit began when Consensys challenged the SEC’s inquiry into its Ethereum transactions and specific features of the MetaMask wallet.
The SEC’s investigation started in April 2022 and led to a Wells Notice in April 2024, which hinted a potential enforcement actions against Consensys for possible violations of federal securities laws.
In response, Consensys went full attack mode, demanding a court ruling to declare that ETH isn’t a security and that its asset transactions don’t count as sales of securities.
After some legal drama, Judge Reed O’Connor ruled that the claims regarding the SEC’s investigation into Ethereum were debatable and unclear.
This decision was based on Consensys’ indication in July that the SEC already stopped its inquiry after approving spot Ethereum ETFs in May. Following the ruling, Consensys expressed disappointment on X.
“Unfortunately, the Texas court today dismissed our lawsuit on procedural grounds without looking at the merits of our claims against the SEC.”
The company also noted that the SEC had already ceased its ‘Ethereum 2.0’ investigation after the lawsuit was filed, which the court recognized as providing relief on an important issue for the Ethereum ecosystem.
MetaMask is in trouble?
While the SEC decided not to pursue enforcement actions against Consensys regarding Ethereum, it did initiate a case against the company concerning its MetaMask, more precisely in case of some inbuilt features like Staking and Swaps services.
The SEC claims that these functionalities violate federal securities laws, and this part of the case still remains unresolved.
Judge O’Connor stated that this issue isn’t yet ready for judgment because the SEC hasn’t made any final decisions on the matter.
He pointed out that more factual developments are necessary before any judicial review can take place.
Law is nuanced, so legal action
The judge explained that since the plaintiff hasn’t identified any final agency action making their claim suitable for judicial review, and because delaying consideration doesn’t cause too much hardship, there is no ripe case or controversy.
He also told that the Wells Notice doesn’t conclude the agency’s decision-making process nor does it establish any legal rights or obligations for Consensys.
And because of this, it doesn’t impose any legal consequences on the firm.
As many industry participants warn, if these investigations continue, they could have lasting effects on how blockchain companies operate within regulatory frameworks in the U.S., so it’s definitely something worth to watch closely.
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