Ethereum co-founder Joe Lubin challenges SEC’s authority in a legal battle over MetaMask

Joe Lubin, co-founder of Ethereum and founder of Consensys, has initiated a legal battle against the U.S. Securities and Exchange Commission (SEC), contesting the regulator’s authority over Ethereum and its associated products, specifically the MetaMask crypto wallet.

SEC targets MetaMask, Consensys pushes back

In April, Consensys received a Wells Notice from the SEC, a precursor to legal action, indicating potential litigation against the company.

The SEC’s concern centers on MetaMask, a product developed by Consensys, which the SEC alleges operates as an unregistered securities broker.

The regulator specifically points to features within MetaMask that allow for the trading of tokens and staking — locking up tokens in return for rewards.

The lawsuit: a fight over Ethereum’s classification

On April 25, Consensys responded by filing a lawsuit against the SEC, accusing it of overreaching its jurisdiction with what Consensys deems an “unlawful seizure of authority over ETH.”

The company argues that ETH, the native cryptocurrency of the Ethereum network, does not possess the characteristics of a security, a financial instrument under the SEC’s purview.

Consensys’s legal action seeks to clarify the regulatory boundaries and assert that Ethereum should not be subjected to the SEC’s oversight in the manner proposed.

Dispute over regulatory definitions

This legal dispute also highlights a broader contention regarding the classification of ETH.

While the SEC has not explicitly labeled ETH a security, Consensys contends that the regulator has been covertly investigating Ethereum with the aim to reclassify it.

This stands in contrast to previous declarations from an SEC director who referred to ETH as a commodity, a stance supported by the Commodity Futures Trading Commission (CFTC).

Consensys argues that its operations were built on this regulatory understanding, which recognized ETH as a commodity, not a security.

SEC’s stance on investor protection

In response to the allegations, an SEC spokesperson emphasized the importance of compliance with securities laws, noting that failing to adhere to these regulations can strip investors of essential protections.

These include measures against fraud and manipulation, proper disclosures, and routine inspections by the SEC, which are crucial for safeguarding the interests of investors and the integrity of the American financial markets.

Implications for the crypto industry

The outcome of this legal confrontation could have significant implications for the cryptocurrency industry, particularly in defining the regulatory framework that governs crypto assets like ETH.

By challenging the SEC, Consensys not only hopes to secure a favorable ruling for itself and Ethereum but also to inspire other entities in the crypto space to resist what it views as undue regulatory encroachment by the SEC.

The post Ethereum co-founder Joe Lubin challenges SEC's authority in a legal battle over MetaMask appeared first on Invezz