The SEC sues Consensys for unregistered securities via MetaMask; it claims $250 million in fees from 36 million cryptocurrency transactions since 2020.
TakeAway Points:
- In its lawsuit, the SEC claims Consensys marketed unregistered securities through its MetaMask wallet and operated as an unregistered broker.
- The SEC’s larger campaign against cryptocurrency companies, such as ShapeShift, TradeStation, and Uniswap, includes this case.
- According to the report, Consensys maintains confidence in its legal position in response to the allegations, arguing that the SEC’s actions represent an overreach of regulatory authority.
SEC sues Consensys
In a significant development, the U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Consensys, a prominent blockchain software firm, in federal court in Brooklyn. The SEC alleges that Consensys, through its digital asset wallet MetaMask, “engaged in the offer and sale of securities” and “acted as an unregistered broker.” The court filing claims that Consensys violated federal securities laws by failing to register as a broker and failing to register the offer and sale of certain securities.
According to the report, this legal action is part of the SEC’s larger campaign against the cryptocurrency industry, in which the regulator has already taken action against other Ethereum and decentralised finance companies. Notably, the SEC is allegedly looking into the Ethereum Foundation and has previously targeted businesses like ShapeShift, TradeStation, and Uniswap.
MetaMask and Staking Programs
The SEC’s lawsuit highlights Consensys’ involvement in staking programs, which pay customers a yield for allowing their tokens to facilitate blockchain transactions. According to the SEC, Consensys brokered over 36 million crypto transactions since 2020, including at least 5 million that were securities. The regulator also alleges that Consensys collected over $250 million in fees through its MetaMask service.
The SEC’s chair, Gary Gensler, has long maintained that many digital assets are unregistered securities subject to SEC rules. In recent months, the agency has sued several high-profile companies, including Kraken and Coinbase Global Inc., for acting as unregistered brokerages or over their staking products.
“Consensys has inserted itself into the US securities markets, yet failed to act in accordance with the provisions of the federal securities laws to which it is subject and that exist to protect investors,” the SEC stated in its complaint.
Consensys’ Reply
Acording to the report, Consensys has been vocal in its opposition to the SEC’s actions. In April, the company preemptively filed its own lawsuit against the SEC, alleging regulatory overreach. The 10-year-old firm argued that the SEC was attempting to redefine well-established legal standards and expand its jurisdiction via lawsuit.
“This is just the latest example of its regulatory overreach — a transparent attempt to redefine well-established legal standards and expand the SEC’s jurisdiction via lawsuit,” Consensys stated.
Meanwhile, less than two weeks ago, Consensys declared victory in its fight with the SEC, announcing that the regulator had closed its investigation into Ethereum 2.0 and would not pursue an enforcement action against the company. However, the SEC’s recent lawsuit indicates that the regulator is still pursuing other issues related to Consensys’ operations, particularly its MetaMask service.
