Has the SEC Given a Free Pass to ConsenSys? What Does This Mean for XRP and Other Projects?

ConsenSys, a startup specializing in blockchain technology, has recently raised objections to the Securities and Exchange Commission’s (SEC) Notice of Proposed Rulemaking (NPRM) that seeks to redefine securities “exchanges.” ConsenSys has sought legal counsel from Bill Hughes to express their concerns regarding the proposed amendments.

According to Mr. Huber, ConsenSys has received favorable treatment from the SEC, despite their website’s claims of generating significant profits through ICOs. For instance, they retain 95% of the profits from Gnosis, which raises doubts about their commitment to decentralization.

Additionally, their primary source of income is listed as “government consulting,” leading to speculation that the SEC might have even compensated Lubin and ConsenSys for the leniency they received.

ConsenSys wrote on Twitter, “Such systems fall outside a proper understanding of “exchange” in the ’34 Act and so cannot be regulated under it. And SEC regulation in the broader blockchain context is further inappropriate given (1) the unresolved antecedent questions about the extent to which the SEC has jurisdiction at all over blockchain-based systems, and (2) the SEC’s limited understanding of blockchain technology and the dynamics of the blockchain ecosystem.”

ConsenSys strongly disagrees with the SEC’s proposal, as it potentially encompasses blockchain protocols, despite the fact that the Proposing Release, a document spanning over 200 pages, does not specifically mention cryptocurrencies, blockchain technology, or their various applications.

According to a blog post on Consensys.net, ConsenSys has argued that the suggested amendments lack legal clarity and introduce uncertainty regarding the definition of “exchange.” They claim that the proposed modifications omit crucial details from the current rule and instead utilize vague and poorly defined terms. As a result, market participants are unable to determine whether their activities assist potential buyers and sellers in current or future transactions.