The US Securities and Exchange Commission (SEC) has intensified its legal battle with the crypto industry by filing a lawsuit against ConsenSys, a blockchain firm known for its MetaMask wallet product and its focus on the Ethereum network.
The SEC alleges that ConsenSys violated federal securities laws by operating as an unregistered broker and dealer while offering services for “crypto securities,” amassing fees exceeding $250 million.
SEC Lawsuit Against ConsenSys
The SEC’s lawsuit against ConsenSys echoes similar complaints against other crypto firms such as Coinbase and Kraken. However, what sets this lawsuit apart is the context surrounding ConsenSys’ response to the SEC’s actions.
In April, ConsenSys filed a lawsuit against the SEC after receiving a Wells notice seeking clarity on whether Ethereum should be classified as a security. Just recently, ConsenSys announced the closure of the SEC’s “Ethereum 2.0” investigation, interpreting it as an indication that Ethereum fell outside the agency’s jurisdiction.
Notably, the SEC did not name Ethereum as one of the unregistered securities offered by ConsenSys in Friday’s filing, which may have led to the approval of the Ethereum ETF applications by the world’s largest asset managers on May 23.
Crypto Industry’s Regulatory Battle
ConsenSys, founded by Joseph Lubin, one of Ethereum’s developers, distinguishes itself from previous SEC targets. Rather than operating as an exchange, ConsenSys focuses on software development, including the MetaMask digital wallet.
The SEC’s lawsuit argues that the firm violated securities laws by enabling the “swapping” of crypto assets through MetaMask. Particularly, the agency has targeted Ethereum staking services, namely Lido and Rocket Pool, alleging that their tokens, stETH and rETH, respectively, are unregistered securities.
The SEC further claims that ConsenSys facilitated over 36 million crypto asset transactions, including at least 5 million involving what the agency deems to be securities.
Previously, the SEC had brought similar charges related to staking against Kraken, resulting in a $30 million settlement, while Coinbase has contested the charges.
While the new SEC complaint against the blockchain firm does not classify Ethereum as a security, it represents another front in the SEC’s ongoing campaign against major players in the crypto industry.
Many within the crypto community may view this as a partial victory, given the absence of Ethereum’s inclusion as an unregistered security. However, the lawsuit further highlights the regulatory uncertainties surrounding the industry’s top companies.
ConsenSys, currently engaged in an ongoing lawsuit against the SEC in Texas, criticized the agency’s actions, accusing it of pursuing an “anti-crypto agenda” through arbitrary enforcement actions and regulatory overreach.
At the time of writing, ETH was trading at $3,777, down 2.3% in the past 24 hours as the crypto market continues to experience significant selling pressure.
Featured image from DALL-E, chart from TradingView.com