The US Securities and Exchange Commission (SEC) has instituted a lawsuit against Metamask developer, Consensys. The Commission alleges that the crypto firm violated securities laws by acting as an unregistered securities broker.
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SEC Accuses Consensys Of Violating Securities Laws Using Metamask
Based on the court document, the SEC claims that Consensys has acted “as an unregistered broker of crypto asset securities through its MetaMask Swaps service” since October 2020. The Commission also accused the crypto firm of engaging within the unregistered offer and sale of securities through crypto staking programs.
The SEC stated that Consensys has brokered over 36 million crypto transactions since 2020 through its MetaMask Swaps, not less than 5 million involving crypto asset securities. Metamask is generally known as some of the widely used crypto wallets. Along with storing their crypto assets on the applying, users should buy and sell cryptocurrencies by swapping one crypto asset for the opposite.
This ‘Swap’ service forms the point of interest of the SEC’s enforcement motion. The SEC claims that a few of these crypto assets are securities, and by enabling users to swap these securities, Consensys acted as an unregistered securities broker, thereby violating securities laws in the method.
The SEC went further to list Polygon (MATIC), Decentraland (MANA), Chiliz (CHZ), The Sandbox (SAND), and Luna (LUNA) because the crypto securities that were made available for trading on Metamask’s swap platform.
Moreover, the SEC accused Consensys of performing a “traditional function of the securities market” by offering and selling securities for Lido and Rocket Pool. The Commission claimed that the staking programs offered by Lido and Rocket Poo are investment contracts and that Consensys was within the unsuitable by offering these securities through unregistered transactions on its ‘MetaMask Staking’ platform.
Total crypto market cap currently at $2.2 trillion. Chart: TradingView
The Genesis Of The Legal Battle Between SEC And Consensys
Interestingly, the SEC’s lawsuit against Consensys comes just months after the crypto firm filed a lawsuit against the Commission, accusing the SEC of an “illegal seizure of authority.” Consensys sought Judicial relief against a possible motion from the SEC. In addition they asked the court to declare that Ethereum wasn’t a security and that the SEC had no jurisdiction over crypto-related matters.
The crypto firm looked to have won that battle, considering that the SEC dropped its investigation into Ethereum’s status as a security. Nevertheless, within the letters informing Consensys in regards to the Commission’s decision to drop its investigation into Ethereum, the SEC had warned the crypto firm that they might bring enforcement actions against them referring to other issues, which they’ve now done.
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Reacting to the SEC’s lawsuit, Consensys stated that it might “vigorously pursue” the lawsuit it had initially filed against the SEC. The crypto firm also remarked that they’d fully expected” the SEC to follow through with its threat of claiming that MetaMask needed to be registered as a securities broker.
Featured image from CNBC, chart from TradingView