Consensys to continue lawsuit against SEC as ‘battle far from over’

Consensys head of litigation Laura Brookover said the company would continue to sue the SEC as the “battle” for regulatory clarity is “far from over.”

In a June 21 interview with CNBC, Brookover said that despite ending the Ethereum 2.0 investigation, the SEC did not provide any regulatory clarity regarding Ethereum’s classification. She added that the firm will continue to fight for more clarity around digital assets.

Brookover also said that two SEC investigations remain underway to determine whether Consensys violated securities laws through the swap and staking features of its MetaMask wallet.

The regulator previously sent a Wells notice to Consensys over both issues, indicating that it intends to take enforcement action on both matters.

Brookover said:

“Our current plans are … to continue fighting so that we can get the relief that we brought the lawsuit to seek.”

Consensys aims to obtain a declaration that the two MetaMask features do not violate securities law, as previously indicated in its April lawsuit.

Conclusion of first case not enough

The SEC ended one investigation through a June 18 letter. Brookover said the first investigation “really focused on the Ethereum protocol itself” and whether ETH is a security asset, including Ethereum 2.0, the merge, and the network’s transition to staking.

Brookover said the SEC’s letter about the end of the probe only confirms that the agency will refrain from charging the firm and does not provide any of the clarity Consensys sought through its legal case.

Brookover said:

“It disclaimed us drawing any conclusion from it, such as … that [the SEC] found that Ether was a commodity and not a security.”

She said the end of the investigation “doesn’t go far enough” in providing transparency on why the agency ended the investigation. It is also unclear how the development is relevant to several other investigations and enforcement actions that the SEC has underway.

Brookover speculated that “mounting pressure” from Congress and other industry members caused the SEC to end its investigation but said the SEC had not provided an explanation.

She also suggested that the SEC’s approval of spot Ethereum ETF rule changes on May 23 is “part and parcel of whatever is going on inside the agency” regarding its stance on ETH.

Brookover condemned the SEC’s overall stance, stating:

“Regulation by enforcement is completely backwards. There should be clarity so that companies … can know for sure whether what they’re engaging in is acceptable under the law …”

She said companies must currently wait for oral arguments during enforcement actions to learn the SEC’s stance. She called the approach “no way to regulate” the crypto sector and urged the SEC to take a more collaborative approach with the industry.

 

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