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SEC sues Consensys, alleging blockchain technology company acted as an unregistered securities broker through MetaMask

The U.S. Securities and Exchange Commission (SEC) is suing Consensys on the grounds that the blockchain technology company’s MetaMask wallet acted as an unregistered securities broker.

According to recent court documents, the SEC accuses Consensys of violating federal law by failing to register as a securities broker with the regulator.

“Since October 2020, Consensys has been acting as an unregistered broker for crypto securities through its MetaMask Swaps service.

Since January 2023, Consensys has engaged in the unregistered offer and sale of securities in the form of crypto asset staking programs and acts as an unregistered broker through its MetaMask staking service. Through its conduct as an unregistered broker, Consensys has earned over $250 million in fees.”

In addition, the SEC alleges that Consensys was also involved in the sale of securities for the crypto staking protocols Lido and Rocket Pool.

“In addition to acting as an unregistered broker in relation to MetaMask Swaps, Consensys performs another traditional function of the securities market: offering and selling securities.

Specifically, Consensys has offered and sold tens of thousands of securities for two issuers: Lido and Rocket Pool. Through this conduct, Consensys acts as an underwriter of these securities and participates in the key points of their distribution.”

Consensys responded to the lawsuit by arguing that the SEC was expanding its power through excessive regulation.

“The SEC is pursuing an anti-crypto agenda guided by ad hoc enforcement actions. This is just the latest example of its regulatory overreach a transparent attempt to redefine established legal norms and expand the jurisdiction of the SEC through litigation.

We are confident in our position that the SEC has not been granted the authority to regulate software interfaces such as MetaMask.”

Earlier this year, the SEC sent a notice to Consensys after saying it was investigating whether smart contract platform Ethereum (ETH) was a security under its jurisdiction. However, Consensys said it received notice that the regulator had ended its investigation into the company earlier this month without taking any enforcement action.

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