The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Consensys, alleging that the blockchain technology company’s MetaMask wallet operated as an unregistered securities broker.
Court documents reveal that the SEC claims Consensys violated federal laws by not registering with the regulatory agency as a securities broker.
The SEC states, “Since October 2020, Consensys has acted as an unregistered broker of crypto asset securities through its MetaMask Swaps service. Since January 2023, Consensys has engaged in the unregistered offer and sale of securities in the form of crypto asset staking programs and acted as an unregistered broker through its MetaMask Staking service. By its conduct as an unregistered broker, Consensys has collected over $250 million in fees.”
Additionally, the SEC alleges that Consensys was involved in the sales of securities for crypto staking protocols Lido and Rocket Pool.
“In addition to operating as an unregistered broker with respect to MetaMask Swaps, Consensys performs another traditional function of the securities market: offering and selling securities. Specifically, Consensys has offered and sold tens of thousands of securities for two issuers: Lido and Rocket Pool. By this conduct, Consensys acts as an underwriter of those securities and participates in the key points of their distribution.”
Consensys has responded to the lawsuit, stating that the SEC is overreaching its regulatory authority to expand its power.
“The SEC has been pursuing an anti-crypto agenda led by ad hoc enforcement action. 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. We are confident in our position that the SEC has not been granted authority to regulate software interfaces like MetaMask.”
Earlier this year, the SEC sent Consensys a Wells notice after stating that it was investigating whether the smart contract platform Ethereum (ETH) was a security under its jurisdiction. However, Consensys received a notice that the regulatory agency concluded its investigation into the firm earlier this month without taking any enforcement action.
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