Texas Court Dismisses Consensys’ Lawsuit Against SEC

Key Takeaways

• The judge ruled that the case was “moot,” explaining that the SEC had not made any final decisions regarding its regulation of Ethereum.
•  The judge dismissed Consensys’ claims around MetaMask, stating “enforcement actions do not constitute final agency actions.”

A federal judge in Texas has dismissed a lawsuit filed by blockchain firm Consensys against the U.S. Securities and Exchange Commission (SEC) and its Chair, Gary Gensler, along with four other commissioners. The lawsuit, initiated in April 2024, was aimed at challenging the SEC’s regulatory actions concerning Ethereum (ETH), accusing the agency of overreach.

On Thursday, Judge Reed O’Connor, from the Northern District of Texas, ruled that the case was “moot,” explaining that the SEC had not made any final decisions regarding its regulation of Ethereum. Because of this, the court found that Consensys’ claims did not meet the legal standard required for judicial review.

Consensys filed the lawsuit after receiving a Wells notice from the SEC. The notice informs the recipient of the charges and provides an opportunity to respond. The company contended that the SEC was attempting to classify Ethereum as a security, an action that would impose more stringent regulations. In its filing, Consensys argued that this effort amounted to “regulatory overreach” and could threaten the broader cryptocurrency industry.

The firm sought a declaration from the court affirming that Ethereum is not a security and that its sales of ETH tokens were not in violation of U.S. securities laws. Additionally, the lawsuit asked the court to block the SEC from taking action against MetaMask, Consensys’ popular crypto wallet that includes staking and swapping services.

However, the court did not rule on the substance of the case, dismissing it on procedural grounds. “Because the plaintiff has not identified final agency action that would render the claim fit for judicial review… the claim lacks a ripe case or controversy,” Judge O’Connor wrote.

In response, Consensys expressed frustration with the court’s decision. In a post on social media platform X (formerly Twitter), the company said, “Unfortunately, the Texas court today dismissed our lawsuit on procedural grounds without considering the merits of our claims against the SEC.”

This lawsuit was closely monitored within the crypto industry, especially after the SEC dropped its investigation into Ethereum 2.0 following the initial filing. Consensys framed this as a significant win for the crypto space, noting that the court acknowledged this outcome. “The Texas court today recognized that the SEC already provided Consensys the relief it sought regarding the Ethereum 2.0 investigation,” the company said in its post.

Despite the court’s dismissal, Consensys vowed to continue fighting, particularly as it remains embroiled in another legal battle with the SEC over its MetaMask platform. The SEC claims that the company violated securities laws by offering unregistered staking services. “We are on the right path, but must remain vigilant,” Consensys said, stressing its commitment to protecting the rights of blockchain developers.

The legal dispute is part of an ongoing clash between Consensys and the SEC, with the regulator increasing its scrutiny of cryptocurrency platforms and services. The SEC has specifically targeted staking services, alleging that they present excessive risks to investors without offering adequate protection.

This case unfolds at a time when the U.S. regulatory landscape is becoming more challenging for the cryptocurrency industry. Although Consensys achieved some success with the termination of the Ethereum 2.0 probe, its legal challenges with the SEC are far from over, especially as the agency continues to examine MetaMask’s operations.