SEC Turns Legal Tables On Consensys, Sues Over Metamask Ethereum Staking Service

ConsenSys Chief Joe Lubin Claims It's A ‘Foregone Conclusion’ That Ethereum Is A Commodity, Not Security

The U.S. Securities and Exchange Commission has launched legal action against Ethereum software provider Consensys, alleging that the latter’s Metamask swap service was an unregistered broker that “engaged in the offer and sale of securities.”

According to the complaint on June 28, ConsenSys has accrued over $250 million in fees by brokering crypto asset transactions and offering staking services without the necessary registration, thereby bypassing crucial investor protections mandated by federal securities laws.

“Since January 2023, Consensys has engaged in the unregistered offer and sale of securities in the form of crypto asset staking programs, and acted as an unregistered broker, through its MetaMask Staking service,” the SEC said in its filing. 

The regulator also alleged that by enabling investments in Lido and Rocket Pool’s staking programs, Consensys has acted as an intermediary in unregistered transactions, depriving investors of necessary protections. 

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

On top of that, the regulator claimed that Consensys itself “brokered transactions in crypto asset securities,” naming MATIC, MANA, CHZ, SAND, and LUNA as unlicensed securities. These tokens have all been labeled securities in past lawsuits.

“From the time of their first offer or sale, each of these Crypto Asset Securities was offered and sold, and continued to be offered and sold on Consensys’s platform as an investment contract and thus a security,” reads the filing.

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Notably, Consensys preemptively sued the SEC in late April after receiving a Wells notice that the agency intended to initiate enforcement action over MetaMask’s staking programs. The Consensys suit, filed in Texas, also made the profound claim that the SEC had secretly considered Ethereum to be a security for over a year and was building a wider case against the second-largest cryptocurrency. 

Then, earlier this month, Consensys revealed that the SEC had ended investigations into Ethereum 2.0. Crypto fans celebrated the news as a major surrender by the regulator that suggested changing tides in the U.S. concerning crypto’s oversight.

While the SEC’s lawsuit today was expected, it nonetheless suggests that the SEC has refused to back down when it comes to launching attacks on America’s high-profile crypto companies.

A spokesperson for Consensys said in a statement on Friday that the firm “fully expected the SEC to follow through on its threat to claim our MetaMask software interface must register as a securities broker.” 

“The SEC has been pursuing an anti-crypto agenda led by ad hoc enforcement action,” the representative said. “This is just the latest example of its regulatory overreach — a transparent attempt to redefine well-established legal standards and expand the SEC’s jurisdiction via lawsuit.”

Consensys contends that the SEC “has not been granted authority” to regulate software interfaces like MetaMask. “We will continue to vigorously pursue our case in Texas for ruling on these issues,” the company asserted.

The price of Ether has dipped 1.4% over the past 24 hours, according to CoinGecko data.

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