Two crypto companies, dYdX and ConsenSys, have announced a new round of layoffs. What’s happening, and why are American regulators being blamed for this?

Antonio Juliano, the CEO of the decentralized derivatives exchange dYdX, announced a 35% layoff. He thanked the former employees for their work and explained the layoffs as the need to “revitalize” the exchange since, in its current form, it is “different from the company dYdX must be.”

“I have seen this over and again, and it will continue. What we are building is much larger than just a company, and this you will always be a part of.”

Notably, the layoffs at dYdX came shortly after ConsenSys cut its staff by 20%. ConsenSys CEO Joseph Lubin cited unfavorable macroeconomic conditions, uncertainty over crypto regulation in the U.S., and the cost of a legal battle with the Securities and Exchange Commission (SEC).

At the same time, Lubin called the company’s financial position stable.

According to him, ConsenSys will focus on its core revenue drivers, which aligns with its previously adopted strategy. The company’s flagship products, MetaMask and Linea, the second-layer Ethereum network, will serve as the basis for further development.

In addition, ConsenSys CEO said that the laid-off employees will receive support after leaving the company, namely, severance pay depending on the length of service, assistance with future employment, and expanded health benefits.

Lubin also told Fortune that the layoffs will affect about 162 of the 828 employees working from all divisions at Consensys. Now, ConsenSys has now become the leader in layoffs in 2024, according to layoffs.fyi.

Why the SEC is again the culprit of all the worst?

In the layoff statement, Lubin cited the SEC as one of the reasons why he will cut staff. In June, the regulator sued the developer of the MetaMask wallet, noting that the company violated the law through the MetaMask Staking service.

The lawsuit comes shortly after ConsenSys filed a lawsuit against the SEC and five of its unnamed employees over its “oversight of ETH,” asking the court to formally approve language that would not classify the asset as a security.

As a result, the SEC’s Division of Enforcement closed its investigation into Ethereum 2.0. The agency took this step after the organization sent a letter asking for clarification on the asset class when approving the spot Ethereum ETF. However, the lawsuit over the SEC’s allegations is ongoing, leaving ConsenSys facing legal costs.

The layoffs come at a time when the market is bucking trends

Notably, the crypto market was booming at the time of the layoff announcement, which is generally considered a good time for crypto companies. Thus, on Oct. 29, the Bitcoin (BTC) rate grew from $70,000 to just over $73,600, approaching the historical maximum of $73,777. Since the beginning of the month, the cryptocurrency’s value has grown by 12%. Analysts associate this trend with forecasts for the U.S. presidential election.

Interestingly, the growth of Bitcoin is also explained by the situation in the U.S., which the CEO of ConsenSys previously complained about, explaining the layoffs.

The growth in the price of Bitcoin is due to several factors. In particular, interest in Bitcoin ETFs from large companies such as BlackRock is increasing, which attracts significant investments. Recently, the U.S. saw an influx of $2.7 billion into Bitcoin ETFs, which helped attract new investors and raise the price.

In addition, the desire to protect against inflation significantly impacts the market. Against a weakening dollar and rising inflation, many investors are turning to limited assets such as Bitcoin to preserve their savings.

dYdX cuts staff while competitors gain momentum

Since the beginning of the year, the crypto market has been recovering from a long crypto winter, with many exchanges ramping up their growth. According to Bloomberg, Crypto.com, Binance, Coinbase, Gemini, and Kraken are hiring as cryptocurrencies like Bitcoin rise—not dYdX, though.

When announcing the staff reduction, Juliano mentioned that in its current form, the exchange is different from what it should be, without specifying what exactly he meant. However, further development will require human capital capable of reviving the platform. Therefore, announcing a 35% staff reduction against the backdrop of crypto exchanges trying to get the most out of the current rally looks illogical, to say the least, but Juliano is hardly worried about FOMO.

How the dynamics of layoffs in the crypto industry have changed?

According to layoffs.fyi, Q1 2023 was the peak in layoffs since 2020, when more than 167,000 employees lost their jobs. However, in 2024, the situation looks much better: the peak of layoffs occurred in Q1, with 57,000 employees who lost their jobs. There were even fewer layoffs in the second and third quarters – 43,000 and 38,000, respectively.

Thus, the story of dYdX and ConsenSys has become more of an exception to the rule than a typical trend for 2024. After massive layoffs in 2022 and 2023, the blockchain job market seems to be recovering.

The United States District Court for the Northern District of Texas dismissed Consensys Software Inc.‘s case against the Securities and Exchange Commission. This was after a long legal battle to determine the status of Ethereum and other similar software products.

Texas Court Ends Consensys Suit Against SEC

The U.S. District Court in Fort Worth has thrown out the allegations made by Consensys against the Securities and Exchange Commission in a recent legal move. The court, presided over by Judge Reed O’Connor, ruled on procedural grounds. The judge determined the claims concerning Ethereum classification and the regulatory approach to MetaMask were not ripe for judicial review. This decision effectively puts an end to the current litigation initiated by Consensys in April of this year.

The dismissal focused particularly on the lack of final agency action from the SEC, which the court noted was a requisite for a substantial legal challenge. This procedural dismissal indicates that despite the issues raised, the court decided not to proceed with evaluating the merits of the case.

Legal Battle Over Ethereum and MetaMask

Initially, Consensys challenged the SEC’s classification of Ethereum and its derivatives as securities. The complaint highlighted concerns over the SEC’s focus on MetaMask, a software service provided by Consensys that facilitates crypto transactions and staking. 

Despite an earlier notification in June about the SEC dropping its investigation into Ethereum, the broader implications of this regulatory scrutiny remained a contentious issue.

Subsequent to the initial lawsuit, the SEC initiated a separate enforcement action in June, accusing Consensys of operating its MetaMask swaps service without proper registration. 

In addition, according to Judge O’Connor, this case lacked the necessary finality from the Securities and Exchange Commission side to be considered ready for court adjudication.

Reactions and Future Regulatory Steps

The court’s decision to dismiss on procedural grounds does not conclude the legal issues surrounding the regulation of Ethereum and other blockchain technologies. 

More so, Consensys has expressed its intention to continue advocating for blockchain developers and to challenge the SEC’s actions in other jurisdictions, indicating that the struggle over crypto regulation in the U.S. is far from over. The case’s dismissal in Texas does not preclude the blockchain company from pursuing other legal avenues to address their grievances.

In addition, most recently, a US Bankruptcy judge Brendan Shannon approved Terraform Labs plan to liquidate its assets following an ongoing SEC lawsuit.

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Ronny Mugendi

Ronny Mugendi is a seasoned crypto journalist with four years of professional experience, having contributed significantly to various media outlets on cryptocurrency trends and technologies. His work includes notable contributions to Cryptopolitan and Coingape News Media, where he shares his insights on the latest developments in the cryptocurrency market. Outside of his journalism career, Ronny enjoys the thrill of bike riding, exploring new trails and landscapes.

Disclaimer: The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.