In a recent interview with Wired, Joseph Lubin, co-founder of Ethereum and CEO of Consensys, shed light on his ongoing legal battle with the U.S. Securities and Exchange Commission (SEC).
Consensys is a leading blockchain software technology company with a core focus on the Ethereum ecosystem. They develop a comprehensive suite of tools, products, and infrastructure designed to empower developers, businesses, and individuals harnessing the potential of Ethereum. Consider ConsenSys a pivotal player in constructing the foundation for the decentralized web.
The conflict, which centers around the SEC’s alleged attempts to classify Ethereum’s native cryptocurrency, ETH, as a security, has far-reaching implications for the future of the decentralized web.
Last month, Consensys received a Wells Notice from the SEC, indicating that the regulator is considering suing the company over its MetaMask wallet. The SEC takes issue with two specific features of MetaMask: token swapping and staking. However, Lubin believes that the SEC’s actions go beyond MetaMask and represent a broader effort to assert control over Ethereum and the decentralized technologies built upon it.
In response to the SEC’s notice, Consensys filed a lawsuit against the regulator, accusing it of an “unlawful seizure of authority over ETH.” The company argues that ETH does not possess the characteristics of a security and that the SEC’s actions could have disastrous consequences for the Ethereum network.
Lubin explains that if the SEC were to successfully classify ETH as a security, it would have a “chilling effect” on Ethereum users in the United States. Individuals would be unable to legally acquire ETH, and software developers would be hindered in their ability to further develop the Ethereum protocol or build applications on top of it. Moreover, Lubin fears that the U.S. could use its influence to pressure other countries to reduce access to decentralized protocols and financial disintermediation.
By bringing the lawsuit against the SEC, Consensys aims to clarify the limits of the regulator’s jurisdiction and encourage the broader crypto industry to push back against what Lubin describes as “aggressive and unlawful SEC overreach.” He argues that the SEC has been “gaslighting the industry” by secretly treating ETH as a security while publicly stating otherwise.
Lubin likens the current situation to the early days of the internet, when new technologies caused confusion and required open dialogue and clear regulation. He believes that, ultimately, the situation will be resolved favorably for Ethereum, but acknowledges that the industry is currently in a “painful stage” marked by resistance from regulators.
A favorable outcome for Consensys would be a clear declaration that ETH is a commodity, not a security, and the eventual approval of ETH spot exchange-traded funds (ETFs) by the SEC. Lubin believes that such a development would open “floodgates” of capital into the Ethereum ecosystem, driving further growth and maturation of decentralized finance (DeFi) applications.
Lubin dismisses the notion that the SEC’s interest in Ethereum intensified following The Merge, a major upgrade to the network’s consensus mechanism. He argues that the post-Merge Ethereum network is more decentralized and secure, and that staking rewards should be seen as income, not investment contracts.
When asked about the SEC’s motivations, Lubin offers a “conspiracy theory,” suggesting that the U.S. government and big banks are resistant to the disintermediation and direct financial agency that decentralized technologies offer. He believes that the SEC’s actions are less about expanding its jurisdiction and more about slowing down or killing new technologies that threaten the status quo.
