The US Securities and Exchange Commission (SEC) recently filed a lawsuit against Consensys, the parent company of MetaMask, for allegedly engaging in activities related to unregistered securities contracts. The lawsuit, filed on 28 June, accuses Consensys of violating federal securities laws by not registering as a broker and failing to register the offer and sale of certain securities, leaving investors without the necessary protections.
According to the SEC, Consensys has reportedly earned hundreds of millions of dollars in fees over the past four years through its MetaMask operations, which the commission claims are illegal. Specifically, the SEC points to Consensys’ MetaMask Swaps service as an example of unregistered brokerage of crypto asset securities since October 2020.
Furthermore, the SEC highlights Consensys’ involvement in the unregistered offer and sale of securities through its MetaMask Staking service since January 2023. The SEC alleges that Consensys has acted as an unregistered broker in these transactions, collecting over $250 million in fees as a result.
The SEC also raises concerns about MetaMask’s integration of Lido’s and Rocket Pool’s Ether liquid staking services, which it considers to be unregistered securities offerings. According to the SEC, investors participate in these staking services with the expectation of profits from the managerial efforts of Lido and Rocket Pool, making them subject to securities laws.
Consensys had received a Wells Notice from the SEC in April regarding its activities as a broker/dealer of illegal securities, and the company anticipated the lawsuit. In response to the SEC’s legal action, Consensys accused the commission of pursuing an anti-crypto agenda through regulatory overreach, claiming that the lawsuit is an attempt to expand the SEC’s jurisdiction and redefine legal standards.
Overall, the lawsuit brought by the SEC against Consensys sheds light on the regulatory challenges faced by companies operating in the crypto industry. As the SEC continues to scrutinize activities related to cryptocurrencies and blockchain technology, companies like Consensys must navigate complex legal requirements to ensure compliance with securities laws and investor protections. The outcome of this lawsuit will likely have significant implications for the future regulation of crypto assets and related services.