SEC Sues MetaMask’s Parent Consensys for Operating as Unregistered Broker

Legal Battles: Cryptocurrency Under Government Scrutiny
Source:AdobeStock
  • The SEC has filed a lawsuit against Consensys, alleging unregistered broker activities and securities sales in Brooklyn federal court.
  • Amid broader crackdowns, SEC targets major crypto players, intensifying regulatory scrutiny despite industry hopes for a policy pivot.

The US Securities and Exchange Commission (SEC) continues its crusade against crypto. On June 28 the regulator filed a lawsuit against MetaMask parent Consensys. The suit, filed in a federal court in Brooklyn, New York, alleges Consensys has “engaged in the offer and sale of securities” and “acted as an unregistered broker”.

Related: Crypto ETF Landscape Heats Up: Australian Bitcoin ETF Buys the Dip, 21Shares Pursues US Solana Listing

The filing reads:

Consensys violated the federal securities laws by failing to register as a broker and failing to register the offer and sale of certain securities.

US SEC

The lawsuit comes just 10 days after Consensys stated that the SEC was backing off from an investigation into Ethereum 2.0. The decision, together with the approval of Spot Ethereum ETF listings in May, was seen as a good sign that the regulator may consider Ethereum to be a commodity.

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After Ethereum transitioned to Proof-of-Stake from Proof-of-Work, some thought Ether’s status as a commodity was under threat. SEC Chief Gary Gensler has stated in the past that most crypto, other than Bitcoin, are securities, based on insufficient decentralisation.

Consensys Tried to Pre-empt SEC’s action

In April, Consensys filed a lawsuit in Texas against the SEC, accusing it of overreach. This legal action followed three subpoenas and a Wells notice from the SEC, which alleged that Consensys had violated federal securities laws.

In an emailed statement to CNBC, a company spokesperson lamented the perceived regulatory overreach stating:

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. We are confident in our position that the SEC has not been granted authority to regulate software interfaces like MetaMask.

Consensys

SEC Increases Pressure on Crypto Sector

In addition to the MetaMask suit, the SEC also filed claims against Lido and Rocketpool, alleging they are securities. In a tweet, crypto investor Ryan Sean Adams, called out the attack by the SEC – which is now suing Uniswap, Kraken, Coinbase, Metamask and Robinhood.

Just days ago crypto exchange Coinbase itself launched Freedom of Information lawsuits against the SEC and the FDIC.

Related: Aussie Analysts Decode Three Key Factors Behind Bitcoin’s Recent Drop to $60K

Adams said, “Gary Gensler will cost Biden the White House”, echoing statements by Ripple CEO Brad Garlinghouse and Mark Cuban.

Donald J Trump, who previously was anti-crypto, has come around and now supports the sector. Adams said the Biden administration had a chance to pivot on crypto but missed the boat. The SEC’s treatment of the sector is unlikely to change under the current administration, Adams added.  

Aaron Feuerstein
Author

Aaron Feuerstein

Aaron Feuerstein is a freelance writer based in Melbourne. His focus is on decentralised finance and the regulatory space surrounding blockchain. He holds a Master's in Accounting. When he is not studying the latest legal case, he enjoys his time as a modest but eager hobby cook.

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