U.S. District Judge Dismisses Consensys Case Against SEC

A U.S. district judge has dismissed a case brought against the Securities and Exchange Commission (SEC) by blockchain and web3 development company Consensys Software Inc.

Judge Reed O’Connor, in the U.S. District Court for the Northern District of Texas (Fort Worth Division), dismissed Consensys’ claims and sided with the SEC on Thursday.

“For the reasons stated above, Defendants’ Motion to Dismiss Plaintiff’s ETH claims is GRANTED, and Counts I, II, and III are DISMISSED AS MOOT,” Judge O’Connor wrote. “Plaintiff concedes it is not pursuing an APA claim under Count IV. Finally, Defendants’ Motion to Dismiss Plaintiff’s MetaMask for lack of subject matter jurisdiction is hereby GRANTED. Accordingly, this action is dismissed without prejudice.”

Consensys filed a lawsuit against the SEC in April, primarily regarding how the agency classified ether (ETH) as a security. Consensys alleged that the SEC labeled ETH as a security and focused its scrutiny on the firm’s MetaMask software. They also mentioned that the SEC staff had issued a Wells notice in April, indicating that an enforcement action was forthcoming.

However, by June, Consensys reported that the SEC had closed its investigation into Ethereum, which they considered a “major win” for the industry. Despite this development, Consensys aimed to pursue the lawsuit to seek a declaration stating that offering the MetaMask Swaps and Staking services does not violate securities laws.

In July, the SEC subsequently filed a lawsuit against Consensys for not registering as a broker regarding its MetaMask swaps service in the U.S. District Court for the Eastern District of New York.

Judge O’Connor stated that none of the SEC’s actions regarding MetaMask were “final.”

“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,” the judge explained. “Defendants’ Motion to Dismiss Plaintiff’s MetaMask claim on ripeness grounds is GRANTED.”

Consensys stated it would continue to fight for the rights of blockchain developers in its case against the SEC in New York.

“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,” the firm added in a statement. “We are on the right path, but must remain vigilant.”

The SEC has declined to comment.

Update: Sept. 19, 10:15 p.m. UTC to include comment from Consensys

Update: Sept. 20, 3:45 p.m. UTC to include the SEC’s decline to comment