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ConsenSys sued by the US SEC for brokering securities on MetaMask Swaps – BitKE

Posted on by darion

The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against MetaMask’s parent company, ConsenSys, accusing the company of “acting as an unregistered broker-dealer for crypto-asset-based securities through the MetaMask Swaps Service.”

“From January 2023 ConsenSys engages in the unregistered offering and sale of securities in the form of cryptographic assets staking programs and operated as an unregistered broker via the MetaMask Staking service” the SEC wrote in its document.

“Thus “Through its operations as an unregistered broker, Consensys collected over $250 million in fees.”

The court motion added:

“ConsenSys violated federal securities laws by failing to register as a broker and by failing to register the offering and sale of certain securities.”

ConsenSys learned of the impending lawsuit back in April 2024 and pre-emptively filed a lawsuit asking a federal court in Texas to declare that the company was not acting as a broker or issuing securities through its software, MetaMask Swaps and Staking.

In the lawsuit, the company also asked the court to halt the SEC’s investigation on the grounds that $ETH is a commodity and therefore the SEC has no jurisdiction to investigate or regulate it.

Less than two weeks ago, the SEC, which allows exchanges to list and trade shares of Ether ETFs, informed ConsenSys that it was closing its investigation into the matter.

“On June 7 (2024), we sent a letter asking the SEC to confirm that the approval of the ETH ETF in May (2024), which was based on Ether being a commodity, means the agency will close its investigation into Ethereum 2.0.” Consensys said.

“Today, the SEC Enforcement Division responded by notifying us that it is closing its investigation into Ethereum 2.0 and will not pursue enforcement actions against ConsenSys.”

But the regulator pressed further against the MetaMask exchange service. According to them, MetaMask Swaps and Staking services violate federal security regulations 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 claims to only offer a user interface that facilitates access to other services such as decentralized exchanges (DEX) and staking protocols. In addition to ConsenSys, the SEC issued a Wells Notice for Uniswap, a leading decentralized exchange.

“This is just the latest example of regulatory overreach – a transparent attempt to redefine accepted legal norms and expand the SEC’s jurisdiction through lawsuits.” the company announced in X.

“We remain clear in our position that the SEC has not been given the authority to regulate software interfaces like MetaMask.

We will continue to press our case in Texas and also defend this new case in New York.”

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