SEC Sues ConsenSys Over MetaMask Staking, Broker Allegations

The U.S. Securities and Exchange Commission sued Ethereum software provider ConsenSys over its MetaMask service Friday, alleging the wallet tool was an unregistered broker that "engaged in the offer and sale of securities."

MetaMask also offered an unregistered securities program through its staking service, the SEC alleged in a filing in the courthouse in the Eastern District of New York. The SEC alleged in its lawsuit that it offered staking services for Lido (LDO) and Rocket Pool (RPL) as investment contracts, suggesting they are also unregistered securities.

According to the lawsuit, MetaMask Swaps allowed investors to trade digital assets with each other through ConsenSys' software. ConsenSys collects a fee for providing these services, and has facilitated more than 36 million crypto transactions over the past four years – though interestingly, it only said that "at least 5 million" of these transactions were in "crypto asset securities."

The SEC said these securities include Polygon (MATIC), Mana (MANA), Chiliz (CHZ), the Sandbox (SAND) and and Luna (LUNA), according to the filing, though it suggested other digital assets might also be securities. Many of these cryptocurrencies have already been named in previous SEC suits as being unregistered securities, though at least some of the issuing entities have disputed this characterization.

"In addition to operating as an unregistered broker with respect to MetaMask Swaps, Consensys performs another traditional function of the securities market: offering and selling securities," the lawsuit said. "Specifically, Consensys has offered and sold tens of thousands of securities for two issuers: Lido and Rocket Pool. By this conduct, Consensys acts as an underwriter of those securities and participates in the key points of their distribution."

"Consensys has collected over $250 million in fees," the SEC alleged.

Friday's lawsuit comes just weeks after ConsenSys announced the regulator had ended investigations into the company tied to Ethereum, citing two letters the SEC sent it.

Those letters from June 18 did caution that the SEC might still bring enforcement actions tied to other issues. Neither letter mentioned MetaMask.

UPDATE (June 28, 2024, 17:10 UTC): Adds additional detail throughout.