The US Securities and Exchange Commission (SEC) has filed a lawsuit against Ethereum software provider Consensys. The lawsuit alleges that its MetaMask service operated as an unregistered securities broker.
The lawsuit, filed in the US courthouse in the Eastern District of New York, also targets Ethereum staking services Lido and Rocket Pool.
SEC Targets Consensys in Latest Crypto Crackdown
According to the court filings, MetaMask facilitated more than 36 million crypto transactions over the past four years. At least 5 million of these transactions involved Polygon (MATIC), Mana (MANA), Chiliz (CHZ), the Sandbox (SAND), and Luna (LUNA). The SEC classifies these tokens as unregistered securities.
“Since at least January 2023, Consensys has offered and sold tens of thousands of unregistered securities on behalf of liquid staking program providers Lido and Rocket Pool,” the SEC stated.
In response to the lawsuit Consensys stated they had expected the SEC to claim MetaMask must register as a securities broker.
“The SEC has been pursuing an anti-crypto agenda led by ad hoc enforcement action.mThis 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 noted.
Read more: 13 Best MetaMask Alternatives in 2024
The SEC’s suit also scrutinizes MetaMask’s staking feature, which allows users to deposit assets to secure the Ethereum blockchain in exchange for interest. This feature is powered by third-party staking services Lido and Rocket Pool, issuing stETH and rETH in exchange for staked assets. The SEC alleges these integrations amount to “investment contracts” and that the liquid staking tokens are unregistered securities.
“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,” the SEC further stated.
Consensys, led by Ethereum co-founder Joe Lubin, has previously been investigated by the SEC. Although Consensys announced those investigations had ended, the latest lawsuit renewed its legal challenges.
Read more: Crypto Regulation: What Are the Benefits and Drawbacks?
Consensys has actively defended its operations and regulatory stance. This lawsuit follows Consensys’s previous legal action against the SEC, seeking relief from the possibility of MetaMask being classified as a broker. The outcome of that case was in favor of the SEC. Consensys believes this new lawsuit simply adds to the SEC’s “anti-crypto” agenda.
“We are confident in our position that the SEC has not been granted authority to regulate software interfaces like MetaMask. We will continue to vigorously pursue our case in Texas for ruling on these issues because it matters not only to our company but the future success of Web3,” Consensys concluded.
These issues highlight the problems arising from unclear and hostile regulations towards crypto. Consensys is one of many companies taking a stand to find a fair middle ground. The outcome of these legal battles could significantly impact cryptocurrency regulation and the future development of Web3.
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