MetaMask developer sues SEC over regulatory overreach

Ethereum ecosystem developer Consensys Software has filed a lawsuit against the U.S. Securities and Exchange Commission (SEC), challenging the agency’s regulatory actions concerning Ethereum and its related services.

The lawsuit was filed in the Northern District of Texas and accuses the SEC of an “unlawful seizure of authority” over Ethereum, asserting that such actions violate the Constitution and federal law.

The suit seeks a series of judicial declarations: that Ethereum (ETH) is not a security, that any SEC investigations based on such a premise would infringe on ConsenSys’s Fifth Amendment rights, and that MetaMask—ConsenSys’s cryptocurrency wallet—is not a broker under federal regulations. Furthermore, ConsenSys requests a court injunction to prevent the SEC from pursuing investigations or enforcement actions related to MetaMask’s swap and staking functions.

This legal action follows a Wells Notice received by ConsenSys on April 10, which indicated the SEC’s intention to bring an enforcement action against the company for violating securities laws through its MetaMask wallet. ConsenSys contests the SEC’s view as it says MetaMask is merely an interface and does not hold or transact customer assets.

The complaint also references a statement made in 2018 by former SEC Director Bill Hinman, indicating that Ethereum is considered a commodity, not a security—a stance seemingly supported by the Commodities Futures Trading Commission (CFTC), which regulates derivatives products tied to Ethereum.

By filing the lawsuit, ConsenSys argues that the SEC’s recent actions constitute an abrupt departure from its previous regulatory stance, violating the constitutional requirement for fair notice under the Due Process Clause. The complaint additionally invokes the “major questions doctrine,” a legal principle that restricts federal agencies from extending their regulatory reach beyond Congressional mandates without clear authorization.”

The lawsuit by ConsenSys is part of a broader trend where various crypto-related firms, including the Blockchain Association and companies like Legit Exchange, have filed preemptive legal actions to block the SEC from categorizing certain crypto assets as securities. These developments come amidst a series of enforcement actions by the SEC against other major crypto platforms such as Binance, Binance.US, Kraken, and Uniswap Labs.