With the staking service of Ethereum and MetaMask under investigation by the U.S. Securities and Exchange Commission (SEC) to determine whether it is considered a security, the parent company of the wallet, Consensys, has filed a lawsuit against the SEC and issued a statement, demonstrating its determination to defend Ethereum.
Consensys points out four reasons why Ethereum is not a security.
In 2018, the SEC made it clear in a public speech that Ethereum is not a security. William Hinman, the director of the SEC’s Division of Corporation Finance, stated at the time:
“Based on my understanding of the present state of Ethereum and its decentralized structure, current offers and sales of Ether are not securities transactions.”
Consensys believes that the SEC has not yet clarified or removed this statement or position, which further strengthens the inference that Ethereum should maintain its non-security status.
In addition, unlike the SEC’s position, the U.S. Commodity Futures Trading Commission (CFTC) has always considered Ethereum as a commodity.
As an open-source blockchain platform, Ethereum’s core characteristic is decentralization, where all information is transparent and open to the public. Consensys emphasizes that its decentralized product characteristics are fundamentally different from typical securities managed by central entities.
Lastly, considering Ethereum’s transition from Proof of Work (PoW) to Proof of Stake (PoS) last year, which is believed to be a reason for the SEC to classify it as a security, Consensys disagrees:
“The change from PoW to PoS does not affect the core nature of Ethereum. This change is only a technological advancement and does not introduce elements that constitute securities.”
Consensys expresses concerns about the potential loss of billions of dollars in economic value if the SEC successfully categorizes Ethereum as a security. The company states that as of July last year, the cryptocurrency industry employed 190,000 people, with 29% of them from the United States. Any destruction of Ethereum’s value and belief as a decentralized platform could potentially lead to massive layoffs in the U.S. cryptocurrency industry.