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- ConsenSys sued by SEC for unlicensed brokerage activities.
- ConsenSys allegedly earned over $250M from unregistered services.
- SEC’s action could redefine crypto regulation in the US.
The US financial regulator sued ConsenSys, the creator of the popular MetaMask wallet for engaging in the business of a broker without a license. The class-action complaint filed on June 28 does not deny that ConsenSys has been engaged in the unregistered offer and sale of securities through MetaMask Swaps since 2020.
JUST IN: 🇺🇸 SEC sues Consensys, alleging MetaMask is an unregistered securities broker.
— Watcher.Guru (@WatcherGuru) June 28, 2024
Details of the Allegations
According to the SEC, ConsenSys has accrued over $250 million in fees through activities linked to crypto asset transactions and staking services, all without the necessary regulatory approvals. This has allegedly deprived investors of vital protections typically enforced by securities regulations. The SEC is seeking a permanent injunction, civil penalties, and other equitable relief to address these violations.
Moreover, ConsenSys is accused of facilitating investments in staking programs by Lido and Rocket Pool, acting as an intermediary in these unregistered transactions. This has raised significant regulatory concerns, as these actions purportedly position ConsenSys as an underwriter and broker without authorization.
ConsenSys’s Response and Broader Context
In a countermove earlier this year, ConsenSys sued the SEC following a Wells notice, which hinted at an upcoming enforcement action. The company has contested the SEC’s approach, labeling it as an overreach of authority, particularly concerning the classification of software interfaces like MetaMask as regulatable entities.
This legal battle is part of a broader scrutiny by the SEC over crypto staking services, with the agency arguing that such activities constitute investment contracts under securities laws. Previous actions include a settlement with the Kraken exchange in February, where Kraken agreed to pay $30 million and cease offering staking services to U.S. clients.
As the legal landscape for crypto assets continues to evolve, this case marks a significant development in how regulatory frameworks might adapt to new technological paradigms. The outcome could set important precedents for the treatment of digital asset transactions and staking services under U.S. securities laws.