In a significant move in its continued scrutiny of the cryptocurrency industry, the U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against blockchain software technology firm ConsenSys. The SEC alleges that ConsenSys operated as an unregistered broker and dealer, a violation of federal securities laws.
ConsenSys, which is recognized for creating the widely-used MetaMask wallet and its work on the Ethereum network, reportedly accumulated over $250 million in fees from offering crypto asset swap services, including those deemed “crypto securities.”
Reacting to a Wells notice from the SEC regarding the status of Ethereum as a security, ConsenSys proactively filed a lawsuit. The firm has also recently notified the public of the closure of the SEC’s investigation into “Ethereum 2.0.” Despite these developments, the SEC’s complaint does not list Ethereum among the unregistered securities offered by ConsenSys. This decision is noteworthy as it may affect the ongoing approval process of Ethereum ETF applications filed by major asset managers.
Joseph Lubin, a co-founder of Ethereum, established ConsenSys with a central focus on software development, as opposed to operating as a trading platform. The SEC’s charges point out that ConsenSys has breached securities laws by facilitating the exchange of crypto assets via its MetaMask service.
The SEC has taken aim specifically at Ethereum staking services such as Lido and Rocket Pool, arguing that their respective tokens, stETH and rETH, are unregistered securities. The accusation extends to ConsenSys’ role in facilitating over 36 million crypto asset transactions, with a minimum of 5 million involving securities transactions.
The lawsuit is part of a broader SEC campaign targeting large players in the crypto space. It comes against the backdrop of a contentious period of increased regulatory clampdowns, albeit without categorizing Ethereum itself as a security in this case.
In response, ConsenSys has criticized the SEC for what it describes as an “anti-crypto agenda” and accuses the regulator of overreaching. The lawsuit embodies the regulatory uncertainties faced by the crypto industry, as firms like ConsenSys navigate a complex and evolving legal landscape.
The legal actions surface amidst a broader market struggle, with Ethereum (ETH) trading at $3,777, marking a 2.3% decrease in the past 24 hours amid a surge of selling pressure in the market. The crypto community is closely watching the fallout of this lawsuit, given its potential implications on the broader regulatory treatment of crypto assets and decentralized finance (DeFi) services.
