Alleged Violations of Securities Laws

The SEC has filed a new lawsuit against Consensys for alleged violations of federal securities laws. The complaint centers on Consensys’s MetaMask wallet services, specifically the Swaps and Staking features, which the SEC claims have been operating as unregistered broker services since October 2020 and January 2023, respectively. Ethereum is down around 2% on the day but has not seen a significant sell-off as of press time.

The SEC asserts that Consensys has collected over $250 million in fees from these activities without providing necessary investor protections.

It claims MetaMask Swaps is a digital platform facilitating transactions in crypto asset securities for retail investors. According to the lawsuit, it offers various features, including identifying the best exchange rates, routing orders, handling customer assets, and executing trades on behalf of investors while charging transaction-based fees. The platform’s use of smart contracts eliminates the need for investors to interact directly with third-party liquidity providers.

Unregistered securities staking

Since January 2023, the SEC claims MetaMask Staking has been involved in the unregistered offer and sale of securities through crypto asset staking programs, collecting transaction-based compensation as an unregistered broker.

The SEC has identified several digital assets traded on the MetaMask Swaps platform, including MATIC, MANA, CHZ, SAND, and LUNA, as securities offered and sold as investment contracts, leading investors to expect profits based on the issuers’ managerial efforts. These assets are similar to those mentioned in the lawsuit against Coinbase last year.

The SEC also claims that the staking programs offered by Lido and Rocket Pool facilitated through MetaMask Staking are investment contracts and, therefore, securities. It claims these were offered and sold without the necessary registration statements filed with the SEC.

The SEC affirms that Consensys exercises discretion over…