SEC Sues MetaMask Broker, Agreement on Escrow Services
The United States Securities and Exchange Commission has filed a lawsuit against Metamask's parent company, Consensys. According to a complaint filed on June 28, the company has been an unregistered broker since 2020 and has been participating in the unregistered offering and sale of securities on MetaMask Swaps.
The complaint alleges that Consensys collected more than $250 million in fees by rigging crypto asset transactions and providing stock services without proper registration, thereby depriving investors of critical protections. The SEC seeks permanent injunctions, civil penalties and other equitable relief for violations of these federal securities laws.
Since January 2023, Consensys has been engaged in the unregistered offering and sale of securities in the form of crypto asset staking programs and has operated as an unregistered broker through the MetaMask Staking service. Consensys collected more than $250 million in fees for its conduct as an unregistered broker.
Additionally, the regulator denied necessary protections to investors by acting as an intermediary in unlicensed transactions facilitating investments in Lido and Rocket Pool's staking programs.
“Agreement offered and sold tens of thousands of securities to two issuers: Lido and Rocket Pool. As such, Consensys will act as the underwriter of those securities and participate in key aspects of their issuance,” the filing said.
Consensus filed a lawsuit against the SEC in April after receiving a notice from the agency challenging attempts to classify Ether (ETH) and related share services as securities. The company said it fully expects the regulator to follow up on the investigation.
“The SEC has been pursuing an anti-crypto agenda driven by temporary enforcement action. This is the latest example of regulatory overreach — a clear attempt to redefine well-established legal standards and expand the SEC's jurisdiction over prosecutions.”
The company argues that the SEC is “not empowered” to regulate software exchanges like MetaMask. “We will continue to aggressively pursue our case in Texas to reach a decision on these matters,” Consensus said in a statement.
After the SEC stops, it goes
The SEC's complaint classifies the staking programs offered by Lido and Rocket Pool as investment contracts, saying that investors participating in the staking program are investing Ether in a joint venture that expects a reasonable return. Neither Lido nor Rocket Pool has filed a registration statement with the SEC.
“The Lido and Rocket Pool Staging Programs are each offered and sold as investment contracts and therefore securities. In particular, as detailed below, investors will invest ETH in the joint venture to obtain a reasonable profit from Lido and Rocket Pool's management efforts.
The SEC facilitated these note programs through the MetaMask platform and Consensys acted as an unregistered broker and underwriter.
Stock service providers have been sued by the agency in the past. In February, crypto exchange Kraken signed a $30 million settlement with the SEC and shut down its lawsuit service for US clients. Another company on the regulator's radar is Coinbase. The exchange has been disputing the agency's claims.
Staking involves locking in a digital wallet to support the security and operations of the blockchain network. Based on the amount held, validators confirm transactions and create new blocks, earning rewards in return. The awards provide stakeholders with an intangible income.
Related: Ether ETF approvals show staking may still be a security in SEC eyes
