Texas Court Dismisses Consensys Case Following SEC Ethereum Ruling

A Texas court dismissed Consensys lawsuit against the US Securities and Exchange Commission (SEC), ending the five-month-long case after the company’s charges against the regulator in April.

The SEC has been called out on multiple occasions for regulatory overreach, with claims that its actions against crypto assets stall innovation.

Court Ends Consensys’ Case Against SEC

Consensys said the court dismissed the case on procedural grounds, disregarding the merits of its claims against the SEC. For the firm, the lawsuit was not just about Ethereum but also about protecting technological advancement from misguided regulatory overreach.

“Our suit against the SEC laid bare the overzealous investigation of Ethereum, and policymakers and the public at large voiced deep concern over the SEC’s investigation of blockchain software development. In a significant win for the industry, the SEC dropped its “Ethereum 2.0” investigation after our litigation was filed, and the Texas court today recognized that the SEC already gave Consensys the relief it sought on that critical issue for the Ethereum ecosystem,” Consensys wrote.

The court’s decision to end the case comes after recent clarification about what crypto asset securities mean. As BeInCrypto reported, the SEC issued an amended complaint, saying it does not consider crypto assets themselves to be a security. Rather, the term refers to the contracts, expectations, and understandings surrounding the sale and promotion of these assets.

Read more: Ethereum ETF Explained: What It Is and How It Works

Similarly, the approval of spot Ethereum ETFs (exchange-traded funds) in May is believed to have vindicated Ethereum from the SEC’s securities label.

“Another huge step forward for regulatory clarity: ETH is not a security! We’ve been saying it for years and today the SEC finally made it official. Coinbase is proud to be the trusted partner and custodian powering 8 of the 9 newly approved ETH ETFs,” Coinbase CEO Brian Armstrong said.

Regulatory Confusion Remains Contentious

The Consensys case against the SEC arose from the regulator’s investigation into Ethereum. The SEC had suggested that ETH could potentially be classified as a security. In its lawsuit, Consensys cited a 2018 statement by SEC Director William Hinman, who stated that Ethereum was not a security.

According to BeInCrypto, Consensys provided four strong arguments to challenge the SEC’s stance. The firm relied on historical precedents and definitions from regulatory bodies, including the Commodity Futures Trading Commission (CFTC).

“The SEC has definitively declared over a number of years that Ethereum is a commodity. So I don’t think you need to actually look any further than what the CFTC has continuously said and what the SEC has said in the past to reach the correct results in this case,” the Consensys spokesperson said.

Therefore, while the court ends the case over Ethereum, it does not settle the underlying issue — conflicting perspectives between regulatory bodies. The regulatory contradiction between the US SEC and the CFTC continues to cause confusion.

Republican Tennessee Congressman John Rose is calling for unilateral regulation. Specifically, he is pushing for the creation of a joint advisory committee between the SEC and the CFTC. 

Read more: Crypto Regulation: What Are the Benefits and Drawbacks?

It remains unknown whether Congressman Rose’s bill will pass. Still, the industry continues to thrive despite being under the shadow of regulatory uncertainties. However, it could reach better heights if threats due to overreach and confusion were diminished.