U.S. SEC Files Lawsuit Against Consensys Over Unregistered Broker Activities

The SEC has filed a lawsuit against Consensys, alleging unregistered broker activities through its MetaMask services.

Key Insights

  • SEC sues Consensys for operating as an unregistered broker through its MetaMask swaps and staking services.
  • Lawsuit alleges Consensys collected over $250 million in fees and sold unregistered securities via Lido and Rocket Pool staking programs.
  • Consensys claims SEC is overreaching and vows to continue its own lawsuit against the agency for regulatory clarity.

NEW YORK (MarketsXplora) – The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against blockchain software company Consensys, alleging that the firm failed to register as a broker through its MetaMask swaps service and violated securities laws with its MetaMask staking service.

The complaint, filed on Friday in the U.S. District Court in the Eastern District of New York, accuses Consensys of engaging in the unregistered offer and sale of securities through crypto asset staking programs. The SEC claims that through its conduct as an unregistered broker, Consensys has collected over $250 million in fees.

Gurbir S. Grewal, director of the SEC’s Division of Enforcement, stated that Consensys had “inserted itself squarely into the U.S. securities markets while depriving investors of the protections afforded by the federal securities laws.”

Lawsuit alleges Consensys sold unregistered securities

The lawsuit alleges that Consensys sold thousands of unregistered securities through staking program providers Lido and Rocket Pool, which issued liquid staking tokens stETH and rETH in return for staked assets. The SEC argues that these tokens represent investment contracts and are therefore securities.

Additionally, the agency claims Consensys brokered transactions in crypto asset securities, specifically naming MATIC, MANA, CHZ, SAND, and LUNA as securities. These tokens have been previously identified as securities in past enforcement actions.

Consensys, which had sued the SEC last month over its approach to regulating Ethereum, said it expected this move. The company stated,

“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 vowed to continue its case against the SEC.

Industry experts have raised questions about the SEC’s interpretation of broker-dealer regulations in the context of decentralized finance. Nick Almond, CEO of Factory Labs, argued that an open-source crypto wallet should not be forced to register as a broker-dealer, emphasizing the importance of user custody and control over assets.

“For me, it’s about custodiality β€” the degree to which users are in sovereign control of their assets. If they are through and through no custody of funds; no broker-dealer,” Almond told MarketXplora in a direct message.

Jorge Izquierdo, founder of Tuyo, echoed this sentiment, stating on X that there’s no difference between offering non-custodial smart contract support and “offering a UI for any random swap.” He noted that the only distinguishing factor is that Consensys collects a fee for providing its swapping service.

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