SEC Drags Consensys to Court Over Metamask Swaps and Staking Services

The U.S Securities and Exchange Commission (SEC) has filed a suit against blockchain company Consensys. 

In a complaint filed on Friday in the U.S. District Court in the Eastern District of New York, the agency alleged that Consensys has failed to register as a broker through its Metamask swap service and violated the law with its staking service.

“By allegedly collecting hundreds of millions of dollars in fees as an unregistered broker and engaging in the unregistered offer and sale of tens of thousands of securities, Consensys inserted itself squarely into the U.S. securities markets while depriving investors of the protections afforded by the federal securities laws,” Gurbir S. Grewal, director of the SEC’s Division of Enforcement said in a statement. “As this enforcement action shows, we continue to hold noncompliant actors in this space accountable, as we do across the securities market.”

Staking with Lido and Rocket Pool

Lido and Rocket Pool are two of the top liquid staking platforms. These platforms allow users to stake their assets and then receive liquid tokens which essentially means stakers can still have access to versions of their staked assets.

In the suit, the SEC further stated that Consensys sold thousands of unregistered securities through staking program providers Lido and Rocket Pool who in turn issued liquid staking tokens called stETH and rETH, in return for staked assets.

“Upon receipt of an investor’s ETH, Lido and Rocket Pool issue the investor a new crypto asset in return—stETH or rETH, respectively—representing the investor’s pro-rata interest in the staking pool and its rewards,” the agency said. 

The agency says that Lido and Rocket Pool are sold as investment contracts, which makes them securities. 

Similarly, the SEC has also named MATIC, MANA, CHZ, SAND and LUNA as securities in previous enforcements, all of which Consensys allegedly uses to broker transactions. 

“From the time of their first offer or sale, each of these Crypto Asset Securities was offered and sold, and continued to be offered and sold on Conensys’s platform, as an investment contract and thus a security,” the SEC alleged. 

Consensys Determined to Fight

Consensys has been engaged in a number of legal tussles with the SEC. The agency recently notified the company it was withdrawing its investigation on Ethereum 2.0. However, it wasn’t clear if Ethereum was no longer regarded as a security by the SEC.

While acknowledging the case withdrawal, Consensys insisted it was going on with the SEC case concerning Metamask, a browser extension wallet that the company created which has become one of the most popular wallets.

The SEC has failed in several cases against crypto companies, including Ripple and Coinbase, and Consensys seems determined to pursue this one to its logical conclusion as well.