SEC Charges Web3 Firm Consensys With Unregistered Sale of Securities

The Securities and Exchange Commission (SEC) sued Consensys Friday (June 28), charging the blockchain and Web3 software company with engaging in the unregistered offer and sale of securities and with operating as an unregistered broker.

These charges center on two services offered by Consensys Software: MetaMask Staking and MetaMask Swaps, the regulator said in a Friday (June 28) press release.

“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 the release.

In a statement posted on its website Friday, Consensys said that it expected these charges and that it will continue to pursue its own lawsuit against the SEC, which it filed in Texas in April.

“The SEC has been pursuing an anti-crypto agenda led by ad hoc enforcement action,” the company said in the statement. “This is just the latest example of its regulatory overreach — a transparent attempt to redefine well-established legal standards and expand the SEC’s jurisdiction via lawsuit. We are confident in our position that the SEC has not been granted authority to regulate software interfaces like MetaMask.”

“We will continue to vigorously pursue our case in Texas for ruling on these issues because it matters not only to our company but to the future success of Web3,” Consensys added in the statement.

In that case, Consensys is seeking a court ruling that the SEC has no legal authority to regulate ether, user-controlled software interfaces built on Ethereum, or the Ethereum blockchain in general, according to a press release issued by the company on April 25.

On May 31, President Joe Biden vetoed a resolution limiting the SEC’s authority over the cryptocurrency sector, saying that the legislation would have constrained regulators’ ability to put up guidelines for the crypto industry.

The legislation, which was passed by Congress in May, would have ended the SEC’s special rules for custodians of crypto assets.