A Texas federal judge has dismissed a lawsuit filed by blockchain development company Consensys against the U.S. Securities and Exchange Commission (SEC) and its Chair, Gary Gensler, along with other commissioners.
The lawsuit revolved around the SEC’s investigations into Ethereum (ETH) and its issuance of a Wells Notice regarding MetaMask, a cryptocurrency wallet developed by Consensys.
The Judge’s Ruling
The case began when Consensys filed a complaint challenging the SEC’s inquiry into its Ethereum transactions and certain functionalities of the MetaMask crypto wallet. The regulator’s probe, which started in April 2022, eventually led to a Wells Notice in April 2024, signaling potential enforcement actions 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 September 19 ruling, Judge Reed O’Connor determined that the claims about the SEC’s investigation into Ethereum were “moot” since Consensys had indicated in July that the agency had stopped its inquest after approving spot Ethereum ETFs in May.
In response to the ruling, the software firm stated 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 that the regulator dropped its ‘Ethereum 2.0’ investigation after the litigation was filed, and the Texas court recognized that they had already provided Consensys with the relief it sought on that “critical issue for the Ethereum ecosystem.”
It also expressed its commitment to “keep fighting” for the rights of blockchain developers in the U.S., hinting at plans to contest the SEC’s actions in Brooklyn.
MetaMask Investigation Continues
Even after electing not to institute enforcement actions against Consensys regarding the Ethereum issue, the SEC did initiate a case against the company for its MetaMask Staking and Swaps service. The regulator claimed that the functionalities violated federal securities laws.
This aspect of the case remains unresolved. In his ruling, Judge O’Connor found that the issue was not ready for judgment, mainly because the SEC had not taken final agency action. He also noted that further factual developments are needed before judicial review can proceed.
Because plaintiff has not identified final agency action that would render the claim fit for judicial review and because withholding consideration subjects plaintiff to scant, if any, hardship, the claim lacks 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, highlighting that it does not “impose legal consequences” on the firm.