SEC Caves on Consensys: Drops MetaMask Lawsuit in Latest Crypto Retreat

The Securities and Exchange Commission ( SEC ) has reportedly agreed to drop its enforcement action against crypto software firm Consensys , according to a Bloomberg report on Thursday, marking yet another significant withdrawal in the agency's recent crypto crackdown.

This latest development, involving the popular MetaMask wallet, underscores the growing narrative of an SEC in retreat, facing mounting industry pressure and a shifting political landscape under the newly elected Trump administration.

Consensys founder Joseph Lubin announced via social media that the SEC had agreed "in principle" to dismiss the securities enforcement case concerning MetaMask, the company's widely used cryptocurrency wallet.

A Consensys official confirmed that the SEC would file a stipulation with the court to effectively close the case, and crucially, would not be imposing a fine. This dismissal follows a rapidly growing list of dropped or paused SEC actions against major crypto players, including Gemini, Uniswap Labs, Robinhood Crypto, OpenSea, and Justin Sun's Tron Foundation.

Just yesterday, Blockhead highlighted the burgeoning sense of an SEC "retreat" as lawsuits stalled and probes fizzled; today's news from Consensys appears to solidify that trend.

The SEC had sued Consensys in June of last year, alleging that the firm violated securities laws by operating as an unregistered brokerage and improperly collecting millions in fees through MetaMask. The agency argued that MetaMask, a gateway to the decentralized finance (DeFi) ecosystem, was facilitating millions of transactions for users without proper regulatory oversight. However, just months later, the SEC is now reportedly backing down, a move that will undoubtedly be seen as a major victory for Consensys and a significant blow to the SEC's expansive regulatory ambitions in the DeFi space.

This sudden reversal on the Consensys case reinforces the perception of a broader SEC shift, as outlined in yesterday's reporting. As previously noted, the SEC, now under Acting Chair Mark Uyeda, has not only closed investigations into numerous firms but also paused litigation against Justin Sun and engaged in meetings with industry leaders.

This pattern suggests a potential reassessment of the agency's aggressive "enforcement-first" strategy, which has drawn widespread criticism for stifling innovation and lacking regulatory clarity. Industry figures like Cameron Winklevoss, upon learning of the SEC's dropped Gemini probe, have publicly lambasted the agency for the "damage" caused by its investigations, demanding accountability and a more reasonable regulatory approach. Uniswap CEO Hayden Adams echoed this sentiment, hailing the dropping of their probe as a "huge win for DeFi."

The reasons for this apparent SEC shift remain subject to speculation, but several factors likely contribute. As previously discussed, the SEC's "regulation by enforcement" approach has faced increasing legal challenges, with some court rulings questioning the agency's expansive interpretation of securities laws in the crypto context. Furthermore, the election of Donald Trump and the anticipation of a more crypto-friendly administration may be exerting political pressure on the agency to adopt a less confrontational stance. The crypto industry itself has also become more organized and vocal in its pushback against perceived regulatory overreach, engaging in lobbying efforts and demanding clear rules of the road.

For Consensys, the dismissal of the SEC lawsuit is a clear win, removing a significant legal and regulatory cloud hanging over its MetaMask business, a critical piece of infrastructure in the Ethereum ecosystem and the wider DeFi space. More broadly, the SEC’s retreat in the Consensys case adds further weight to the growing narrative of a regulatory shift in the US crypto landscape.