The U.S. Securities and Exchange Commission has taken legal action against Ethereum software provider Consensys for allegedly operating an unregistered broker service through its MetaMask swap service. The SEC claims that Consensys has engaged in the unregistered offer and sale of securities, accruing over $250 million in fees without the necessary registration required by federal securities laws. The regulator alleges that Consensys has acted as an intermediary in unregistered transactions by enabling investments in staking programs offered by Lido and Rocket Pool, depriving investors of necessary protections.
In response to a Wells notice received from the SEC, Consensys preemptively sued the SEC in late April, claiming that the agency had secretly considered Ethereum to be a security for over a year and was building a broader case against the cryptocurrency. Despite Consensys’s revelation earlier this month that the SEC had ended investigations into Ethereum 2.0, the SEC has now filed a lawsuit against the company for its alleged unregistered broker activities. This move by the SEC suggests that the regulatory body is continuing its attacks on high-profile crypto companies in the U.S.
Consensys has stated that it fully expected the SEC to pursue legal action against its MetaMask software interface for operating as a securities broker. The company believes that the SEC is engaging in regulatory overreach and attempting to redefine legal standards to expand its jurisdiction through lawsuits. Consensys argues that the SEC does not have the authority to regulate software interfaces like MetaMask and plans to vigorously pursue its case in Texas for a ruling on these issues. Despite the SEC’s lawsuit, the price of Ether has only dipped 1.4% in the past 24 hours, according to CoinGecko data.
Overall, the legal action taken by the SEC against Consensys highlights the ongoing regulatory challenges faced by crypto companies in the U.S. The SEC’s allegations of unregistered broker activities against Consensys point to a larger issue of compliance and investor protection within the crypto industry. Consensys’s preemptive lawsuit against the SEC and the regulator’s continued pursuit of enforcement action suggest a contentious relationship between regulators and crypto companies. As the legal battle between Consensys and the SEC unfolds, the outcome could have broader implications for the regulation of cryptocurrency in the U.S. and beyond.
