Consensys Responds to SEC Lawsuit Over MetaMask, Here’s All

Following the SEC lawsuit where Consensys is accused of operating as an unregistered broker through its MetaMask software, the firm has issued a response.

The SEC accused MetaMask of carrying out activities similar to securities brokerage without the appropriate registrations through its swap and staking services. Moreover, this legal action, filed in the U.S. District Court for the Eastern District of New York, follows a Wells notice Consensys received in April.

SEC’s Lawsuit Against Consensys

According to the SEC, Consensys, via MetaMask, facilitated over 36 million crypto asset transactions, including 5 million that involved crypto asset securities, without the required registration. These activities are said to have earned Consensys more than $250 million in transaction fees.

The SEC is specifically concerned about MetaMask’s Swaps and Staking services as these, in the view of the regulator, involve the sale of unregistered securities tokens, including CHZ, LUNA, MATIC, MANA, and SAND.

Besides directly facilitating transactions, MetaMask Swaps is alleged to act as an intermediary by searching for the best exchange rates and managing customers’ assets through smart contracts. The staking aspect of MetaMask, which involved collaborations with entities such as Lido and Rocket Pool, reportedly also involved the offer and sale of securities through staking programs that were also unregistered.

Consensys’s Defense and Legal Strategy

As a result of the SEC’s legal actions, Consensys has come out in support of their legal stance, claiming that the SEC cannot regulate software interfaces like MetaMask as brokers. The company has decided to go to court in Texas for this very matter, stressing that this case is not only vital for Consensys but for the entire web3 industry.

Consensys claims that what the SEC has done is to overstep its regulatory mandate and change the legal precedent that has been set. The company has taken the position that as a software interface it does not translate to being a securities broker hence clearing up the allegations.

The legal conflict with the SEC is taking place at the background of the growing pressure from the regulatory authorities on the cryptocurrency market. This lawsuit is similar to other high-profile cases such as the current case against Coinbase. Consensys has also previously sued the SEC in Texas claiming that MetaMask Swaps and Staking are not brokers as they are software tools, with reference to the case SEC v. Coinbase.

Read Also: SEC Sues ConsenSys For Conducting Securities Via MetaMask