The United States Securities and Exchange Commission (SEC) has sued Consensys, the company behind the MetaMask crypto wallet, for allegedly operating as an unregistered broker and offering unregistered securities through MetaMask Swaps since 2020.
According to the lawsuit filed on June 28, Consensys amassed over $250 million in fees from crypto transactions and staking services without obtaining the necessary registration, violating federal securities laws.
The SEC seeks a permanent injunction, civil penalties, and other forms of equitable relief.
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The SEC's filing further alleges that Consensys has acted as an intermediary in unregistered transactions by facilitating investments in Lido and Rocket Pool's staking programs.
Staking, a process where cryptocurrencies are locked in digital wallets to support blockchain operations, offers validators rewards for confirming transactions and creating new blocks, which generates passive income for stakers.
The SEC classifies these staking programs as investment contracts and, therefore, securities. It contends that investors in these programs expect profits from the managerial efforts of Lido and Rocket Pool, neither of which is registered with the SEC.
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 to a Wells notice, Consensys took legal action against the SEC on April 25, challenging the regulator's efforts to categorize Ether (ETH) and staking services as securities.
Consensys maintains that the SEC lacks the jurisdiction to regulate software interfaces such as MetaMask. The company affirmed in its statement that it will persistently seek a resolution on these matters through its ongoing case in Texas.
The SEC has been pursuing an anti-crypto agenda led by ad hoc enforcement action. 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.
Staking has previously come under SEC scrutiny. In February 2023, the Kraken crypto exchange was ordered to stop providing staking services to US clients and pay $30 million in fines as part of a settlement.
As the SEC continues to tighten its grip on crypto, the outcome of this case against Consensys could have significant implications for the industry.
