O U.S. Securities and Exchange Commission (SEC) initiated legal action against Metamask Developer, Consensys. The Commission alleges that the crypto company violated securities laws by acting as an unregistered securities dealer.
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SEC accuses Consensys of violating securities laws by using Metamask
According to court documentthe SEC claims that Consensys acted “as a unregistered broker of crypto asset securities through its MetaMask Swaps service” since October 2020. The Commission also accused the crypto firm of engaging in the unregistered offer and sale of securities through crypto staking programs.
The SEC stated that Consensys has brokered more than 36 million crypto transactions since 2020 through its MetaMask Swaps, at least 5 million involving crypto asset securities. Metamask is known as one of the most widely used crypto wallets. In addition to storing your crypto assets in the app, users can buy and sell cryptocurrencies by exchanging one crypto asset for another.
This ‘Swap’ service forms the focal point of the SEC’s enforcement action. The SEC claims that some of these crypto assets are securities, and by allowing users to exchange these securities, Consensus acted as an unregistered securities broker, thereby violating securities laws in the process.
The SEC went further by listing Polygon (MATIC)Decentraland (MANA), Chiliz (CHZ), The Sandbox (SAND), and Luna (LUNA) as the crypto securities that have been made available for trading on Metamask’s swap platform.
Additionally, the SEC accused Consensys of performing a “traditional securities market function” by offering and selling securities for Lido Pool and Rocket. The Commission alleged that the staking programs offered by Lido and Rocket Poo are investment contracts and that Consensys made a mistake by offering these securities through unregistered transactions on its “MetaMask Staking” platform.
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 legal relief from potential SEC action. They also asked the court to declare that Ethereum was not a security and that the SEC had no jurisdiction over matters related to cryptography.
The crypto firm seemed to have won this battle considering that the SEC dropped its investigation on Ethereum’s status as a security. However, in cards informing Consensys about the Commission Decision to drop its investigation into Ethereum, the SEC warned the crypto company that they could bring enforcement actions against them regarding other issues, which they have now done.
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Reacting to the SEC lawsuit, Consensys stated that it would “vigorously pursue” the lawsuit it initially filed against the SEC. The crypto firm also noted that it fully expected “the SEC to make good on its threat to claim that MetaMask should be registered as a securities broker-dealer.”
Featured image from CNBC, chart from TradingView