SEC Intensifies Legal Battle with ConsenSys Over Alleged Securities Law Violations

The US Securities and Exchange Commission (SEC) has escalated its legal confrontation with the cryptocurrency industry by filing a lawsuit against ConsenSys, a blockchain firm known for its MetaMask wallet and its work on the Ethereum network.

The SEC claims that ConsenSys breached federal securities laws by operating as an unregistered broker and dealer while offering services for "crypto securities," earning over $250 million in fees.

Details of the SEC Lawsuit

This lawsuit mirrors previous actions against other crypto companies such as Coinbase and Kraken but stands out due to ConsenSys' unique response. In April, ConsenSys filed a lawsuit against the SEC after receiving a Wells notice, seeking clarity on Ethereum's classification as a security. Recently, ConsenSys announced the closure of the SEC’s “Ethereum 2.0” investigation, suggesting Ethereum is not under the SEC’s jurisdiction. Interestingly, the SEC did not list Ethereum as one of the unregistered securities in its latest filing, which might have influenced the approval of Ethereum ETF applications on May 23.

ConsenSys and the Crypto Industry’s Regulatory Struggle

Founded by Joseph Lubin, one of Ethereum's co-creators, ConsenSys focuses on software development, including the MetaMask digital wallet, rather than operating as an exchange. The SEC argues that ConsenSys broke securities laws by enabling the swapping of crypto assets through MetaMask, particularly targeting Ethereum staking services such as Lido and Rocket Pool, claiming their tokens (stETH and rETH) are unregistered securities.

The SEC asserts that ConsenSys facilitated over 36 million crypto asset transactions, with at least 5 million involving what it considers securities. This is similar to previous charges against Kraken, which resulted in a $30 million settlement, while Coinbase is currently contesting its charges.

Although the SEC's new complaint does not categorize Ethereum as a security, it marks another step in its campaign against major crypto industry players. This might be seen as a partial victory by the crypto community due to Ethereum’s exclusion as an unregistered security. However, the lawsuit underscores the ongoing regulatory uncertainties affecting leading companies in the sector.

ConsenSys, which is currently in an ongoing lawsuit against the SEC in Texas, has criticized the agency, accusing it of enforcing an “anti-crypto agenda” through arbitrary regulatory actions.

Market Impact

At the time of writing, ETH is trading at $3,777, down 2.3% in the past 24 hours, as the crypto market continues to face significant selling pressure.