SEC files lawsuit against Consensys

The SEC claims in the Friday filing that Lido and Rocket Pool are unregistered securities

article-image

Artsaba Family/Shutterstock and Adobe modified by Blockworks

share

The Securities and Exchange Commission filed a suit against Consensys Software on Friday.

The SEC is alleging that the company failed to register as a broker as well as offering and selling unregistered securities. 

The lawsuit didn’t come as a surprise to Consensys, which said that it “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. 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. We are confident in our position 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 because it matters not only to our company but the future success of Web3,” a spokesperson told Blockworks.

In its suit, the SEC targeted MetaMask Swaps. The firm, through Swaps, has “brokered over 36 million crypto asset transactions — including at least 5 million transactions in crypto asset securities” since 2020, the SEC argued.

The regulator also alleges that Consensys “holds itself out as a place to buy and sell crypto assets (which include crypto asset securities), recommends trades with — as Consensys itself puts it — the ‘best’ value, accepts investor orders, routes investor orders, handles customers assets, carries out trading parameters and instructions on the customer’s behalf, and receives transaction-based compensation.”

Read more: Is the SEC weighing a lawsuit against Consensys?

“By its conduct as an unregistered broker, Consensys has collected over $250 million in fees,” the suit claims. 

On top of Swaps, the regulator is also targeting Staking.

“Indeed, Consensys developed and deployed MetaMask Staking for the specific purpose of offering and selling the Lido and Rocket Pool staking program investment contracts,” the SEC said.

Following that, the regulator claims that Lido and Rocket Pool are unregistered securities.

“Consensys’s unregistered offer and sale of the Lido and Rocket Pool securities, as to which it also acts as an unregistered broker, violates the federal securities laws […] Indeed, registration statements provide investors with material information about the securities offering and the issuer’s business and financial condition, so that investors can make informed investment decisions,” the SEC claimed. 

Specifically, the regulator is making the argument that Consensys acted as an “underwriter” for Lido and Rocket Pool through its offerings.

The claims by the SEC Friday line up with what Consensys has previously said that the SEC alleged in its Wells notice. According to a lawsuit filed by Consensys against the SEC earlier this year, the SEC targeted MetaMask Swaps in an investigation, warning Consensys that it may pursue legal action.

Last summer, the SEC filed suits against both Coinbase and Binance. The regulator alleged that the two also offered and sold unregistered securities.

The SEC also alleged that Coinbase and Binance operated as unregistered brokers (as well as unregistered exchanges). The SEC specifically targeted Coinbase’s staking service as well. Despite an attempt by Coinbase to dismiss the suit, the regulator’s claims moved forward in a court earlier this year, with Judge Katherine Polk Failla finding that the SEC “sufficiently alleged that Coinbase offers and sells the Staking Program as an investment contract.”

Updated June 28, 2024 at 1:48 pm ET: Added comment from Consensys.

Updated June 28, 2024 at 1:19 pm ET: Expanded on SEC allegations against Consensys.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

kamino cover.jpg

Research

Kamino has solidified its position as the leading money market on Solana and is emerging as a DeFi bluechip. Although DeFi competition is fierce, Kamino has kept iterating on its product to provide the best-in-class UX, paired with a robust risk management framework and battle-tested infrastructure. Given the rollout of Kamino Lend V2, the protocol may scale aggressively over the coming months, penetrating previously untapped markets in Solana DeFi.

article-image

Why that the bull market might not start until 2025

article-image

August’s annual headline figure came in at 2.3% after an upward revision Thursday, so things are moving in the right direction 

article-image

MSTR’s stock price was roughly $248 at 2 pm ET Thursday

article-image

Ever since rates came off zero and fiscal deficits exploded, markets have started paying close attention to how the government is funding itself

article-image

Solana memecoins are collectively at an all-time high

article-image

Optimistic rollups like Optimism, Arbitrum and Base are seeing rapid adoption relative to zk rollups