By Michael Scott
The US SEC leveled charges against Consensys, alleging violations in the MetaMask Ethereum staking service. The Ethereum-based software giant is set to bear enforcement action from the US Securities and Exchange Commission (SEC) over the MetaMask wallet.
The US SEC filed the lawsuit against the software on Friday, June 28, alleging it performed an unregistered broker role for crypto asset securities via the MetaMask Swaps service.
SEC Lawsuit Against Consensys
The Commission submitted in the Friday filing that Consensus had offered securities for sale since January last year despite not registering the services. As such, the crypto asset staking initiatives were executed without the unregistered broker via its MetaMask staking service.
SEC submitted that the unregistered broker conduct enabled Consensys to earn $250 million in fees. The lawsuit arose when the crypto space touted the changing regulatory landscape for the US digital assets.
Interestingly, the US Supreme Court had overturned the Chevron deference doctrine in a ruling delivered earlier on Friday. The ruling overturned the long-standing pillar in the US law that allowed federal agencies such as the SEC authority to interpret powers and purviews.
Consensys allied to the Supreme Court decision to argue that the SEC lacks the right and capability to regulate crypto initiatives such as MetaMask. It added that the lawsuit by the SEC represents the latest regulatory overreach and an apparent attempt to redefine the legal standards by expanding the regulator’s jurisdiction.
Consensys expressed confidence in its position that the Commission lacks authority to regulate software interfaces such as MetaMask.
Consensys had back in April leveled a preemptive suit following the Wells Notice sent by the agency indicating an intention to sue MetaMask over the staking programs.
The lawsuit submitted a provocative claim that the Commission had, over 12 months, secretly identified Ethereum as a security. The Consensys suit decries that the suit is a broader case targeting the entire crypto asset network.
SEC is suing Consensys a month after the defendant hinted that the regulator would terminate the case against Ethereum.
Confusion on Ethereum Status
Despite the wide celebration witnessed across the crypto industry, the Commission hardly confirmed nor dismissed the news. Such occurred as the crypto space witnessed changing tides in crypto regulation in Washington.
Consensys considered the lawsuit a surprise, though explained by SEC’s refusal to surrender in the war with influential US crypto firms.
The stunning reversal by the SEC saw eight applications secure the green light, including Grayscale, Bitwise, iShares, and VanEck. Also on the list are Fidelity, Franklin, Invesco Galaxy, and ARK21Shares.
The Friday suit by the Gary Gensler-led regulator alleges Consensy’s wrongdoing for facilitating the MetaMask client’s stake ETH through the Lido and Rocket Pool’s staking programs. The regulator considers the staking programs were presented and sold to clients as investment contracts, thus securities.
The lawsuit was noncommittal on identifying Ethereum as security but waded through to profile staked ETH security. It is a delicate stance to consider still ETH a commodity.
Ethereum blockchain embraced staking to run operations since the Ethereum merge in 2022. Such is central to the apparent case that ended against Ethereum.
In May, the SEC relegated it to the corner when it approved 194-b registrations for the spot Ethereum ETFs. Such declared ETH as not a security within the SEC’s lens.