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On Friday, the Securities and Exchange Commission brought its latest lawsuit against the crypto industry, this time targeting Consensys, a blockchain firm focused on the Ethereum network best known for its MetaMask wallet product.<\/p>\n
Echoing similar complaints brought against other crypto firms, such as Coinbase<\/a> and Kraken<\/a>, the SEC is alleging Consensys violated federal securities laws by failing to register as a broker and dealer while offering services for securities, ultimately collecting over $250 million in fees.<\/p>\n While the accusations echo past actions, the lawsuit is notable for the controversy surrounding the escalating legal battle. In April, after receiving a Wells notice\u2014a formal letter that the SEC plans to sue\u2014Consensys preemptively filed<\/a> its own lawsuit against the agency, arguing for clarity over the issue of whether Ethereum is a security.<\/p>\n Just 10 days ago, Consensys announced that it had received a letter from the SEC, noting that the agency had closed its so-called \u201cEthereum 2.0\u201d investigation, with the firm arguing that meant that Ethereum didn\u2019t fall under the agency\u2019s jurisdiction\u2014a topic of great consequence for crypto industry participants. In Friday\u2019s lawsuit, the SEC didn\u2019t name Ethereum as one of the unregistered securities offered by Consensys.<\/p>\n \u201cConsensys inserted itself squarely into the U.S. securities markets while depriving investors of the protections afforded by the federal securities laws,\u201d Gurbir S. Grewal, Director of the SEC\u2019s Division of Enforcement, said in a press release<\/a>.<\/p>\n Founded by one of the developers of Ethereum, Joseph Lubin, Consensys deviates from other recent subjects of lawsuits from the SEC. Rather than functioning as an exchange like Coinbase<\/a> or Kraken, Consensys develops software, including MetaMask, a digital wallet that allows users to hold and move cryptocurrencies, as well as stake Ethereum\u2014a process that involves earning a yield.<\/p>\n In its 59-page lawsuit<\/a>, the SEC alleges that Consensys violated securities laws by allowing the \u201cswapping\u201d of crypto assets through MetaMask, as well as offering staking services, taking the role of an unregistered broker in both scenarios. <\/p>\n The SEC argues that Consensys has brokered over 36 million crypto asset transactions, including at least 5 million involving what the agency deems to be securities. The SEC has previously brought similar charges related to staking against Kraken and Coinbase, with Kraken settling<\/a> for $30 million and Coinbase fighting the charges.<\/p>\n Despite the new charges, many in the crypto industry will likely view the new complaint as a win because it doesn\u2019t name Ethereum as a security. Fortune<\/em> previously reported<\/a> that the SEC had been investigating Ethereum\u2019s security status through a series of subpoenas to related companies, leading to the preemptive lawsuit from Consensys. However, the political waters seemed to change with the passage<\/a> of a crypto regulation bill in the House of Representatives in May, with the SEC signaling approval<\/a> for Ethereum ETFs immediately after\u2014a decision onlookers had previously viewed as unlikely.<\/p>\n While the new lawsuit won\u2019t break new legal ground for the SEC, it does represent a new front in a multipronged campaign against many of the industry\u2019s top companies. The agency filed the Consensys complaint in the U.S. District Court for the Eastern District of New York.<\/p>\n A spokesperson for Consensys, who noted that the firm\u2019s lawsuit against the SEC in Texas is ongoing, said in a statement that the company \u201cfully 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.\u201d<\/p>\n<\/div>\nEthereum 2.0 <\/h2>\n
\u2018Regulatory overreach\u2019<\/h2>\n
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