SEC issues Wells Notice to ConsenSys warning MetaMask Wallet of being an unlicensed broker

Consensys, the parent company of Metamask, the little fox wallet that is popular among users in the currency circle, filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) on Thursday. According to legal documents, Consensys claimed that the SEC intended Recognizes Ethereum (ETH) as a security and criticizes this as an "illegal seizure of power" over Ethereum.

The lawsuit documents read: Every ETH holder, including Consensys, will worry that if he or she were to transfer ETH on the network, it would violate securities laws... which would cause the Ethereum blockchain to was discontinued in the United States, thereby undermining one of the Internet's greatest innovations.

Consensys’ complaint asks the federal court to declare that ETH is not a security, and declares that any investigation of ConSenSys based on the premise that Ethereum is a security would violate administrative procedures. It also hopes that the court can declare that MetaMask is not a federal law. The provision of mortgage services by brokers under the Company does not violate securities laws.

ConsenSys received the SEC Wells Notice this month

The reason why ConsenSys took such a big step to file a lawsuit against the SEC is because the company stated that they received the SEC’s Wells Notice on April 10. (Wells Notice), intending to take enforcement action against MetaMask wallet for violating securities laws. The complaint revealed that the SEC told Consensys during the conversation that MetaMask was an unlicensed broker-dealer.

Regarding the SEC’s warning, ConsenSys denied that it acted as a broker, claiming that the wallet was merely an interface and neither held customers’ digital assets nor performed any trading functions.

CFTC Chairman: BTC and ETH are both commodities

At the same time, Consensys cited the SEC’s sister regulatory agency, the Commodity Futures Trading Commission (CFTC), in its lawsuit documents, regarding Ethereum’s views. Institutions classify ETH as a "commodity" rather than a security.

CFTC Chairman Rostin Behnam emphasized at the annual meeting of the House Agriculture Committee in early March that Ethereum (ETH) is a "commodity" rather than a security, and said that BTC and ETH, the two largest tokens, accounted for approximately 60% to 70% of the total currency market value, especially requires legislative supervision by Congress.

It is unclear whether the SEC will actually file a lawsuit to follow up on the Wells Notice, or whether it will resolve the issue with Consensys in a Texas court. More time will be needed to observe.

SEC frequently launches attacks on the encryption industry

Not long before this new lawsuit between Consensys and SEC occurred, Uniswap, the leading decentralized exchange, also confirmed on the 11th of this month that it had received A Wells Notice from the SEC may face regulatory litigation.

Will I definitely be a defendant if I receive the SEC’s Wells Notice?

Usually, receiving a Wells Notice from the SEC does not necessarily mean that a formal lawsuit will be filed. The usual Wells Notice initiation process is:

1. After the SEC’s investigation of the suspicious company is completed, Warning to individuals or businesses

2. After receiving the Wells Notice, the business will be given 30 days to rebut the charges and present arguments to prove its innocence

3. The SEC files the notice Afterwards, you have 6 months to decide whether to file a lawsuit and take enforcement action

What other encryption companies have received Wells Notices from the SEC?

• #Ripple Labs: In December 2020, the SEC accused Ripple and two of its executives of selling securities without registering, resulting in the immediate delisting of XRP from Coinbase. (SEC prosecutes)

• Coinbase: In March 2023, the SEC sent a Wells Notice to Coinbase. Coinbase’s stock price fell by more than 15% after the market closed, and protests continued. (SEC prosecuted in June)

• "Paxos", once the third largest stablecoin BUSD issuer, received a Wells notice in February 2023, and Paxos was terminated soon after Cooperation with Binance on BUSD. (The New York Department of Financial Services ordered Paxos to stop minting new BUSD)

However, based on past experience, the probability of SEC prosecution is not low, especially in the cryptocurrency field. Companies usually proceed to At the stage of civil litigation, the final result is often to settle and lose money.

Affect Metamask’s currency issuance plan?

On the other hand, Metamask officials announced as early as August 2022 at the developer community gathering that they would explore the possibility of issuing native tokens with an open attitude. Although the official previously stated that there will be no currency issuance plan in the short term, the team is still focused on the continuous optimization of the product.

But this time after receiving a warning from the SEC, it may be another blow to the company’s plan to issue currency. But on the other hand, the SEC seems to still insist on the position that Ethereum is a security. It may also have more impact on the cryptocurrency world and make the chance of spot ETF passing this year even slimmer. The follow-up deserves our continued attention. .

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