A U.S. district judge dismissed a lawsuit filed by Ethereum software giant ConsenSys against the U.S. Securities and Exchange Commission (SEC) on Thursday, ruling that the firm’s claims were “moot” due to the lack of “final” actions by the agency.
Judge Reed O’Connor explained:
Because Plaintiff has not identified final agency action that would render the claim fit for judicial review and because withholding consideration subjects Plaintiff to scant, if any, hardship, the claim lacks a ripe case or controversy.
~Judge Reed O’Connor
Consensys had filed a Texas lawsuit against the Securities and Exchange Commission (SEC) and its Commissioners in April. The company argued that the SEC unlawfully claimed that Ethereum’s ETH token was a security.
The lawsuit sought an injunction preventing the SEC from taking legal action against MetaMask, Consensys’ popular cryptocurrency wallet with more than 30 million monthly active users.
ConsenSys receives a warning of a potential securities violation lawsuit
Consensys initially learned of the SEC’s interest in MetaMask in April 2022 and has provided extensive material since then. On April 10 this year, Consensys received an SEC “Wells Notice” indicating that an enforcement action was impending. The SEC claims the MetaMask Swaps and Staking services violate federal securities laws since Consensys is not a broker-dealer.
A Wells notice is typically one of the final steps before the SEC issues formal charges. It generally lays out the framework of the regulatory argument and offers the potentially accused an opportunity to dispute the SEC’s claims. The notice informed the company that the SEC had concluded an investigation and was considering a lawsuit; however, it didn’t necessarily mean that the regulator would file a suit.
The court dismissed ConsenSys’ lawsuit against the SEC, declaring the ETH claims moot
The Ethereum software giant claimed the SEC internally classified Ethereum as a security and sought a declaration from the agency to confirm that Ethereum is not considered a security.
However, Judge Reed O’Connor dismissed the claims related to MetaMask’s offerings, noting that the enforcement actions do not qualify as final agency actions. He stated that the Notice neither represents the completion of the SEC’s decision-making process nor establishes the Plaintiff’s legal rights or obligations.
The ETH-related claims brought by Consensys were dismissed as moot. This was expected, as the SEC dropped its investigation into ETH earlier this summer and gave the green light to ether ETFs.
ConsenSys stated that the Texas court dismissed their lawsuit on procedural grounds without addressing the merits of their claims against the SEC. The court recognized that the SEC had already granted the relief they sought for the Ethereum ecosystem.
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