The Texas “economic miracle” is a well-established fact and the latest data from the Texas Work Commission backs it up: In this year’s first quarter, the state enjoyed the largest increase in nonagricultural employment across the country, posted record-high levels of jobs and logged its 36th consecutive month of positive annual growth.
Texas has built on this momentum and emerged as a decisive leader for so-called Web3 innovation. In other words, that’s the decentralization of blockchain technologies and token-based economics. Blockchain is the mechanism that records digital transactions across computers.
This is no accident: Texas legislators have intentionally crafted pro-crypto policies which have, in turn, attracted a robust ecosystem of developers and miners. And the state’s deregulated power market allows for access to inexpensive power complemented by a healthy mix from renewables.
These are just some of the reasons we relocated our company, Consensys, from New York to North Texas last year. We were confident that Texas would be the optimal home for our core offerings, built on Ethereum — the world’s second-largest blockchain — and powered by ether, the digital commodity that underpins it.
More precisely, we concluded that Texas’ unique alchemy of business-savvy leaders, encouragement of innovation and stable regulatory environment would allow Consensys to help shepherd the next phase of the internet’s development. The hallmarks of this next phase — transparency, security, and accessibility, all controlled by the user, not any big tech company — are undeniably ground-breaking. That’s why companies around the world are already building software applications to run on Ethereum. And why the biggest asset managers in the world are working on asset tokenization using Ethereum.
Yet all this potential is under imminent attack from unelected regulators in Washington. Without legal authority, the Securities and Exchange Commission is in the process of arbitrarily reclassifying ether from a commodity to a security so that it can enforce the sort of registration and other requirements that attach to securities (such as bonds, stocks and other investments) under its jurisdiction.
But ether is plainly and logically not a security. On multiple occasions, the SEC itself has affirmed this point — as has its sister agency Commodity Futures Trading Commission — and our entire business model has been built against the backdrop of this clear, prior regulatory consensus.
The SEC’s regulatory escalation belies fundamental principles of separation of powers, where it is the job of Congress to legislate and assign jurisdiction over blockchains like Ethereum. Texas knows all too well the risks inherent in federal regulatory overreach and the SEC’s proposed power grab in this instance is unlawful, unwarranted and arbitrary. It also directly and materially impacts Texas by dismantling a growing sector that both supports highly-skilled Texas jobs and represents the cutting edge of technology, the way we store our data and the future of our digital interactions.
More broadly, if the SEC prevails, it spells the end of the Ethereum blockchain in the United States by rendering ether functionally inaccessible and unusable. Software developers in Texas and around the country wishing to create applications that are interoperable with Ethereum would have to register as securities broker-dealers with the SEC itself, a draconian step that would basically outlaw all current software development in the U.S. relating to Ethereum as well as everyday transactions in ether that are essential to on-chain transactions.
We hope the state of Texas, no stranger to aggressively fighting federal regulatory overreach, joins us in halting the SEC in its tracks. We took a major step recently by filing litigation against the SEC, asking a federal court to order the SEC to end its unlawful campaign.
We urge Texans who value innovation and economic independence to follow suit, support this unfortunate but all-too-necessary effort, and preserve the state’s hard-earned leadership position at the forefront of Web3 innovation.
Joseph Lubin is co-founder of Ethereum and founder and CEO of Consensys.
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