The Securities and Exchange Commission, the SEC filed a lawsuit against Consensys Software, the company behind the Ethereum, alleging they failed to register as a broker and sold unregistered securities.
Software police
The SEC’s lawsuit didn’t surprise Consensys, which anticipated the move. The company told the press, they expected the SEC to assert that their MetaMask software interface should be registered as a securities broker.
Consensys accused the SEC of following an anti-crypto agenda through enforcement actions, claiming the lawsuit is an attempt to unlawfully expand the SEC’s jurisdiction.
Consensys maintains that the SEC doesn’t have the authority to regulate software interfaces like MetaMask and plans to continue its legal battle in Texas.
Trading business
The SEC’s lawsuit specifically targets MetaMask Swaps, a feature that finished over 36 million crypto asset transactions since 2020, including at least 5 million transactions involving crypto asset securities.
The regulator alleges that Consensys acts as a broker by providing a platform for buying and selling crypto assets, recommending trades, handling customer assets, and receiving transaction-based fees.
And the brokers need licenses. The SEC claims that through these activities, Consensys earned over $250 million in fees.
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The staking, the federal laws, and the investment decisions
The SEC is also targeting Consensys’s staking activities, particularly with MetaMask Staking, which offers investment contracts for Lido and Rocket Pool.
And the investment contract is a synonym for securities, so the SEC alleges that these staking programs are unregistered securities and that Consensys’s involvement as an unregistered broker violates federal securities laws.
The regulator argues that registration statements are essential for providing investors with important information about the securities offering and the issuer’s financial condition, supporting informed investment decisions.
The SEC’s claims align with allegations previously mentioned in an infamous Wells notice, sent to Consensys.
According to a lawsuit Consensys filed against the SEC earlier this year, the regulator had been investigating MetaMask Swaps and warned of potential legal action.
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