SEC Sues MetaMask Developer Consensys as It Expands Legal Crusade Against Crypto Industry

The Securities and Exchange Commission filed its latest lawsuit against the cryptocurrency industry on Friday, this time targeting Consensys, a blockchain firm focused on the Ethereum network, best known for its MetaMask wallet.

Echoing similar complaints leveled against other cryptocurrency companies, such as Monetary base AND KrakenThe SEC alleges that Consensys violated federal securities laws by failing to register as a broker and dealer while offering securities services, ultimately raking in more than $250 million in commissions.

While the allegations echo past actions, the lawsuit is notable for the controversy surrounding the escalating legal battle. In April, after receiving a notice from Wells, a formal letter that the SEC intends to sue, Consensys preemptively archived its own lawsuit against the agency, arguing for clarity on the question of whether Ethereum is a security.

Just 10 days ago, Consensys announced that it had received a letter from the SEC notifying the firm that the agency had closed its so-called investigation into Ethereum 2.0, with Consensys arguing that this meant Ethereum fell outside the agency’s jurisdiction, a matter of great consequence for cryptocurrency industry participants. In Friday’s lawsuit, the SEC did not name Ethereum as one of the unregistered securities offered by Consensys.

“Consensys has inserted itself directly into U.S. stock markets, while depriving investors of the protections afforded by the federal securities laws,” said Gurbir S. Grewal, director of the SEC’s Division of Enforcement, in a Press release.

Ethereum 2.0

Founded by one of Ethereum’s developers, Joseph Lubin, Consensys is unlike other recent SEC lawsuits. Instead of operating as an exchange like Coinbase or Kraken, Consensys develops software, including MetaMask, a digital wallet that allows users to hold and move cryptocurrencies, as well as stake Ethereum, a process that involves earning a return.

In its 59 pages causethe SEC alleges that Consensys violated securities laws by allowing the “trading” of crypto assets through MetaMask, as well as offering staking services, taking on the role of an unregistered broker in both scenarios.

The SEC alleges that Consensys brokered more than 36 million cryptocurrency transactions, including at least 5 million involving what the agency believes to be securities. The SEC has already filed similar staking-related charges against Kraken and Coinbase, with Kraken settlement for $30 million and Coinbase is fighting the charges.

“Over-regulation”

Despite the new allegations, many in the cryptocurrency industry will likely view the new complaint as a victory because it does not name Ethereum as a security. Luck earlier reported that the SEC was investigating the security status of Ethereum through a series of subpoenas to related companies, leading to Consensys’ pretrial lawsuit. However, the political waters seemed to be changing with the ride of a cryptocurrency regulation bill in the House of Representatives in May, with the SEC reporting approval for Ethereum ETFs soon after, a decision that observers had previously deemed unlikely.

While the lawsuit does not break any new legal ground for the SEC, it does represent a new front in a multi-pronged campaign against many of the industry’s top firms. The agency filed the Consensys complaint in the U.S. District Court for the Eastern District of New York.

A spokesperson for Consensys, who noted that the company’s lawsuit against the SEC in Texas is ongoing, said in a statement that the company “fully expected the SEC to carry out its threat to demand that our interface MetaMask software were to register as a securities broker.

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