The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Consensys, alleging that the MetaMask wallet from the blockchain technology company operated as an unregistered securities broker. Recent court filings state that Consensys violated federal laws by failing to register as a securities broker with the regulatory agency.

The SEC claims that since October 2020, Consensys has been functioning as an unregistered broker for crypto asset securities through its MetaMask Swaps service. Additionally, since January 2023, Consensys has been involved in the unregistered offering and sale of securities through crypto asset staking programs, also acting as an unregistered broker via its MetaMask Staking service. The SEC asserts that Consensys has accumulated over $250 million in fees through its activities as an unregistered broker.

Moreover, the SEC accuses Consensys of participating in the sales of securities related to crypto staking protocols Lido and Rocket Pool. In addition to operating as an unregistered broker for MetaMask Swaps, Consensys has been conducting activities typical of the securities market by offering and selling securities. Specifically, Consensys has facilitated the offering and sale of tens of thousands of securities for two issuers – Lido and Rocket Pool. This behavior positions Consensys as an underwriter for the securities and plays a significant role in their distribution.

In response to the lawsuit, Consensys criticized the SEC for what it perceives as regulatory overreach in an attempt to expand its jurisdiction. Consensys stated, “The SEC’s actions reflect a bias against the cryptocurrency sector, manifested through arbitrary enforcement measures. This lawsuit is another instance of regulatory overreach, which aims to redefine established legal norms and extend the SEC’s authority through litigation. We firmly believe that the SEC lacks the mandate to regulate software interfaces like MetaMask.”

Earlier this year, the SEC issued Consensys a Wells notice, indicating an investigation into whether Ethereum (ETH) as a smart contract platform qualified as a security within its jurisdiction. However, Consensys announced that it had received notification that the SEC had concluded its investigation into the company without taking any enforcement action earlier this month.

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