The U.S. securities regulator has filed a lawsuit against Consensys, accusing it of operating as an unregistered broker and engaging in the unregistered offer and sale of securities through MetaMask Swaps since 2020.
According to the complaint filed on June 28, Consensys has allegedly collected over $250 million in fees from brokering crypto asset transactions and offering staking services without proper registration, thereby depriving investors of crucial protections.
The move comes barely a week after Consensys said that the U.S. Securities and Exchange Commission (SEC) decided to close its investigation into Ethereum 2.0. MetaMask developer highlighted said in a post on X: “Ethereum survives the SEC. This means that the SEC will not bring charges alleging that sales of ETH are securities transactions.”
Consensys explained that the SEC’s decision followed a letter sent by the company on June 7, which requested confirmation that the SEC’s approval of spot ether exchange-traded funds (ETFs) in May implied an end to the investigation. The approval, though not final, was based on the understanding that ETH tokens are commodities.
The SEC is seeking a permanent injunction, civil penalties, and other equitable relief against Consensys for these alleged violations of federal securities laws. The complaint states, “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 regulator claims that Consensys has facilitated investments in Lido and Rocket Pool’s staking programs, acting as an intermediary in unregistered transactions and denying investors essential protections. The filing reads, “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.”
In response, Consensys argued that the SEC has been pursuing an anti-crypto agenda through ad hoc enforcement actions, calling it a transparent attempt to redefine well-established legal standards and expand the SEC’s jurisdiction via lawsuits.
The SEC’s complaint classifies staking programs offered by Lido and Rocket Pool as investment contracts, claiming that investors involved in these programs are investing Ether in a common enterprise with a reasonable expectation of profits. Neither Lido nor Rocket Pool has filed a registration statement with the SEC.
The SEC argues that by facilitating these staking programs through its MetaMask platform, Consensys has acted as an unregistered broker and underwriter. Staking service providers have previously faced similar actions from the SEC. In February, Kraken crypto exchange settled with the SEC for $30 million and ceased its staking services for U.S. clients. Coinbase is also disputing the SEC’s claims regarding staking as a security in court.
