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The United States Securities and Exchange Commission (SEC) has filed a new lawsuit against Consensys, owner of the MetaMask cryptocurrency wallet. The regulator accused the company of violating federal securities laws.

The focus of the accusation is on the MetaMask wallet services, specifically the Swaps and Staking functionalities. According to the SEC, the company has been operating unregistered brokerage services since October 2020 and January 2023, respectively.

The complaint further alleges that Consensys, through its MetaMask Swaps platform, facilitated cryptocurrency securities transactions for retail investors. In this way, the company would have raised more than US$250 million in fees without offering due protections to investors.

MetaMask Swaps allows you to identify the best exchange rates, route orders, handle client assets, and execute trades on behalf of investors, charging transaction-based fees.

Additionally, the SEC argues that MetaMask Staking has engaged in the unregistered offering and sale of securities through crypto staking programs. Since January 2023, Consensys has allegedly collected transaction-based compensation as an unregistered broker-dealer.

Among the digital assets traded on the MetaMask Swaps platform are MATIC, MANA, CHZ, SAND and LUNA, which the SEC considers to be securities offered and sold as investment contracts.

SEC x Consensys

The SEC’s action follows a series of investigations and notices, including a Wells Notice issued earlier this year, which led Consensys to counterattack with a lawsuit alleging excessive authority by the SEC.

Despite the lawsuit, Ethereum, which is also the target of regulatory concerns, was down about 2% on the day but did not see a significant selloff.

According to the SEC, Consensys exercised discretion in selecting third-party liquidity providers and the digital assets available for trading, using its market knowledge in a manner similar to traditional brokers.

The agency is seeking a permanent injunction to stop Consensys from violating securities laws. It is also seeking civil monetary penalties and other remedies to protect investors.

Prior to the announcement of the SEC lawsuit, Laura Brookover, head of litigation at Consensys, stated in a recent interview that the company will continue to sue the SEC for greater regulatory clarity.

She highlighted the need for clear guidelines to support innovation while ensuring compliance with existing laws, reflecting a broader concern within the crypto community about the need for balanced regulation.

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