Texas court dismisses Consensys’ lawsuit against SEC

A federal judge in Texas has dismissed a lawsuit filed by blockchain development company Consensys against the US Securities and Exchange Commission (SEC) and its chairman, Gary Gensler, along with other commissioners.

The lawsuit revolved around the SEC’s investigations into Ethereum (ETH) and its issuance of a Wells Notice on MetaMask, a cryptocurrency wallet developed by Consensys.

The judge’s sentence

The case began when Consensys filed a complaint challenging the SEC’s investigation into its Ethereum transactions and certain functionalities of the MetaMask crypto wallet. The regulator’s investigation, which began in April 2022, eventually led to a notice from Wells in April 2024, which pointed to possible enforcement action against the blockchain company for violations of federal securities laws.

Consensys then filed a lawsuit seeking a court ruling declaring that ETH is not a security and that its asset transactions did not qualify as sales of securities.

However, in his ruling on September 19, Judge Reed O’Connor determined that claims about the SEC’s investigation into Ethereum were “disputed” since Consensys had indicated in July that the agency had stopped the its research after approving Ethereum spot ETFs in May.

In response to the ruling, the software company said in a post on X: “Unfortunately, the Texas court today dismissed our lawsuit on procedural grounds without looking at the merits of our claims against the SEC.”

The company also said the regulator dropped its “Ethereum 2.0” investigation after the litigation was filed, and the Texas court acknowledged they had already provided Consensys with the relief it sought on this “critical issue for the Ethereum ecosystem.”

He also expressed his commitment to “keep fighting” for the rights of blockchain developers in the US, hinting at plans to challenge the SEC’s actions in Brooklyn.

The MetaMask investigation continues

Even after opting not to bring enforcement actions against Consensys regarding the Ethereum issue, the SEC brought a case against the company over its MetaMask Staking and Swaps service. The regulator claimed the features violated federal securities laws.

This aspect of the case remains unresolved. In his ruling, Judge O’Connor found that the matter was not ready for trial, primarily because the SEC had not taken definitive agency action. He also noted that further developments need to be made before judicial review can proceed.

Because plaintiff has failed to identify the ultimate agency action that renders the claim eligible for judicial review and because withholding consideration subjects plaintiff to a hardship, if any, the claim does not has a ripe case or controversy.

He added that the Wells Notice “neither marks the consummation of the agency’s decision-making process” nor establishes the plaintiff’s legal rights or obligations, stressing that it does not “impose legal consequences” on the firm.

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