Fox Business journalist Eleanor Terrett has suggested that the U.S. Securities and Exchange Commission (SEC) may reevaluate its legal action against blockchain firm Consensys. Terrett noted on X that the regulator’s shifting stance on staking could prompt a review of its case against Consensys, which was sued last year over MetaMask’s staking services. She highlighted similarities between the agency’s claims against Consensys and those it recently dropped in its lawsuit against Coinbase.
“Given the SEC’s newfound interest in staking, it seems logical that it will also reconsider its lawsuit against Consensys,” Terrett stated. He added, “The SEC also alleged Consensys had been operating as an unregistered broker, the same claim it’s now dropping against Coinbase.”
Consensys Challenges SEC’s Proposed Exchange Rule Change
Consensys has been actively pushing back against the agency’s regulatory approach, recently submitting a formal letter opposing its proposed expansion of the definition of “exchange.” The company argues that the proposed changes could bring decentralized finance (DeFi) protocols under securities law, a move it claims would exceed the American watchdog’s legal authority and violate fundamental constitutional protections.
Given the @SECGov’s newfound interest in staking, it seems logical that it will also reconsider its lawsuit against @Consensys, which it sued last year over its @MetaMask staking service. The SEC also alleged Consensys had been operating as an unregistered broker, the same claim… https://t.co/dwO5D87FLY
— Eleanor Terrett (@EleanorTerrett) February 24, 2025
In its submission to the SEC’s crypto task force, overseen by Commissioner Hester Peirce, Consensys’ Senior Counsel William C. Hughes outlined several objections. He argued that the revised exchange definition extends beyond the intent of the Securities Exchange Act of 1934, which was originally meant to regulate marketplaces where securities are actively bought and sold.
Instead, the SEC’s amendments would encompass DeFi protocols, which merely provide tools that traders use independently to facilitate transactions. Hughes further contended that the agency’s proposal conflicts with the Administrative Procedure Act (APA) by disregarding crucial public feedback.
He noted that in 2022, numerous comments pointed out that decentralized systems would struggle to comply with the commission’s operational standards. According to Consensys, this suggests the agency is pursuing a predetermined agenda aimed at restricting DeFi projects.
Concerns Over Regulatory Overreach
Hughes also criticized the agency for failing to provide a thorough cost-benefit analysis. He emphasized that the proposed amendments lack practical advantages and primarily serve to expand the agency’s oversight. Consensys raised concerns about the SEC underestimating the number of entities that would be affected, citing that the amendments could impact “hundreds if not thousands of projects and protocols.”
Additionally, the company’s submission argued that the rule change would violate the First Amendment by broadly covering communication methods between traders, even when no explicit agreement occurs. Hughes pointed out that terms such as “communication protocols.”
The criteria for determining when a group is deemed to “bring together” market participants remain ambiguous, raising Fifth Amendment due process concerns. Consensys has urged the the U.S. regulator’s crypto task force to withdraw the proposed amendments, arguing that they pose significant regulatory and constitutional issues.
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