SharpLink Gaming, a sports betting platform, recently raised $425 million from Consensys to establish an Ethereum-based corporate treasury.

However, confusion over regulatory filings related to this strategy led to a staggering 70% drop in SharpLink's shares.

The significant decline was triggered by a misinterpretation of an S-3 registration statement with the SEC, which investors mistakenly believed indicated insider selling.

This filing allowed for the potential resale of over 68 million common shares, which heightened market fears and panic selling.

Consensys' General Counsel, Matt Corva, described the market reaction as 'FUD'—fear, uncertainty, and doubt—stemming from a misunderstanding of the filing process.

In reality, the S-3 filing was a standard procedure following a private placement, intended to register shares for potential resale rather than indicating actual sales by insiders.

Joseph Lubin, CEO of Consensys and Chairman of SharpLink, emphasized on social media that neither he nor Consensys had sold any shares, clarifying the routine nature of the filing.

Lubin's intervention aimed to alleviate market confusion and underscored the need for better financial literacy regarding regulatory processes in both crypto and traditional finance.

Despite these clarifications, SharpLink's stock price has yet to recover from the drastic plunge, which saw shares fall from $32.5 to a low of $8 before slightly rebounding to $11.15 after-hours on June 12, 2025.

The misunderstanding surrounding the regulatory filing led to a rapid decline in stock value within hours, reflecting the volatility in the market.

SharpLink had previously distinguished itself as the first NASDAQ-listed company to hold Ethereum as a primary reserve asset, setting it apart from Bitcoin-focused firms.

In light of the current situation, SharpLink announced plans to raise up to $1 billion for further ETH purchases, hinting at a potential future announcement to mitigate stock losses.