Consensys Sues SEC Over "Unlawful" Ethereum Authority Following Wells Notice

Consensys is suing the US Securities and Exchange Commission (SEC) for its "unlawful seizure of authority” over Ethereum.

Filed on Thursday, the complaint urges the regulator to classify Ethereum as not a security. "The U.S. Securities and Exchange Commission seeks to regulate ETH as a security, even though ETH bears none of the attributes of a security — and even though the SEC has previously told the world that ETH is not a security, and not within the SEC’s statutory jurisdiction," Consensys said in the complaint.

Consensys revealed it was handed a Wells Notice on 10 April. The Wells Notice is not a formal prosecution or regulatory enforcement document. It is an early warning that the SEC will take enforcement action against suspicious projects.

In the past, projects such as Ripple received the SEC’s Wells Notice which immediately led to its delisting from Coinbase. Uniswap was the latest recipient of a Wells Notice.

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Consensys claims the SEC has classified Ethereum as a security and has "trained its sights" on the firm's MetaMask wallet product. The firm denies acting as a broker, clarifying that the wallet is “simply an interface” and “neither holds customers’ digital assets nor carries out any transaction functions.”

The complaint, filed in the District Court for the Northern District of Texas, also highlighted that the regulator's stance goes against its own past statements about cryptocurrency being a commodity. It also pointed towards the Commodities Futures Trading Commission (CFTC)'s authority over Ethereum.

Consensys claims it “built its business against the backdrop of this regulatory consensus” and that the SEC's power grab is "about face" over Ethereum and therefore violates "the Constitutional requirement of fair notice under the Due Process Clause.”

"The SEC’s unlawful seizure of authority over ETH would spell disaster for the Ethereum network, and for Consensys," Consensys's suit claims.

Coinbase's Chief Legal Officer, Paul Grewal, supported Consensys's lawsuit on X, stating, "I know ETH is a commodity. You know ETH is a commodity. The CFTC knows ETH is a commodity. It's time for the SEC to admit that it still knows ETH is a commodity too. No more games. Thank you to @Consensys for standing up against the SEC's unlawful expansion of authority."

Coinbase has been at loggerheads with the SEC for years. Most recently, the exchange launched a legal challenge against the regulator. The action, filed in the U.S. Court of Appeals for the Third Circuit, stems from the SEC's December rejection of Coinbase's formal petition for rulemaking. This petition sought to clarify the regulatory framework governing the crypto industry, a request that Coinbase contends was dismissed without sufficient explanation or justification. The exchange accuses the SEC of overstepping its authority by applying traditional securities law to crypto assets without adapting its regulations to the unique characteristics of these digital assets.

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The heart of the dispute lies in the SEC’s refusal to establish clear, crypto-specific regulations, a stance that Coinbase argues is both arbitrary and in violation of legal standards.

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Coinbase's legal team argues that the SEC's approach to crypto regulation—primarily through enforcement actions rather than through the establishment of new rules—fails to provide the industry with the stable standards needed for compliance. This, they claim, leaves companies facing enforcement actions, including Coinbase itself, without clear guidance on how to operate within the law.