The United States Securities and Exchange Commission (SEC) has filed a suit against MetaMask parent company, ConsenSys, alleging that the company ‘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,” the SEC wrote in its filing.
“By its conduct as an unregistered broker, Consensys has collected over $250 million in fees.”
The court filing adds:
“ConsenSys violated the federal securities laws by failing to register as a broker and failing to register the offer and sale of certain securities.”
ConsenSys had learned of the impending suit back in April 2024 and pre-emptively filed a suit asking a federal court in Texas to find that the company neither acts as a broker nor issues securities through its software offerings, MetaMask Swaps and Staking.
REGULATION | United States Notifies ConsenSys of Legal Action Against MetaMask as it Labels ETH a Security
The SEC reportedly believes the MetaMask Swaps and Staking services violate federal security laws because ConsenSys is not a broker-dealer. A broker-dealer is a… pic.twitter.com/HemC76sh1T
— BitKE (@BitcoinKE) April 30, 2024
The company’s suit had also sought the court to halt the SEC’s investigation on the grounds that $ETH is a commodity and therefore the SEC lacks jurisdiction to investigate or regulate it.
Less than 2 weeks ago, the SEC, which had approved for stock exchanges to list and trade shares of Ether ETFs, informed ConsenSys that it was closing its investigation on the matter.
“On June 7 [2024], we sent a letter asking the SEC to confirm that the ETH ETF approvals in May [2024], which were predicated on Ether being a commodity, meant the agency would close its Ethereum 2.0 investigation,” Consensys said.
“Today, the Enforcement Division of the SEC responded by notifying us that it is closing its investigation into Ethereum 2.0 and will not pursue an enforcement action against ConsenSys.”
But the regulator has pressed further over the MetaMask swap service. According to them, MetaMask Swaps and Staking services violate federal security laws because ConsenSys is not a broker-dealer.
A broker-dealer is a financial entity registered to trade securities on behalf of clients, but which may also trade for itself.
ConsenSys contends that it merely offers a user interface that facilitates access to other services like decentralized exchanges (DEXs) and staking protocols. Besides ConsenSys, the SEC has issued a Wells Notice to Uniswap, the leading decentralized exchange.
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With a market capitalization of $7.6 billion, the $UNI token ranks as the 20th largest cryptocurrency by market cap with UniSwap being the biggest decentralized exchange with a 24-hour… pic.twitter.com/IrvYj1S77Q
— BitKE (@BitcoinKE) April 12, 2024
“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,” the company said on X.
“We are confident in our position that the SEC has not been granted authority to regulate software interfaces like MetaMask.
We will continue to press our case in Texas as well as defend this new case in New York.”
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