The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Ethereum software provider ConsenSys, alleging that its MetaMask wallet tool functioned as an unregistered broker and engaged in the offer and sale of unregistered securities through its Swaps and Staking products. The lawsuit, filed Friday in the Eastern District of New York, also targets Ethereum staking services Lido and Rocket Pool.
Details of the Allegations
The SEC claims that MetaMask’s Swaps service facilitated over 36 million cryptocurrency transactions in the past four years, with at least 5 million involving crypto asset securities. These securities include tokens such as Polygon (MATIC), Decentraland (MANA), Chiliz (CHZ), The Sandbox (SAND), and Terra (LUNA). Additionally, the SEC scrutinizes MetaMask’s staking feature, which allows users to earn interest by securing the Ethereum blockchain. This feature integrates with Lido and Rocket Pool, providing users with liquid staking tokens (stETH and rETH) in exchange for their deposits.
Market Impact and Concerns
The lawsuit marks the SEC’s latest effort to regulate the cryptocurrency market, particularly focusing on staking services and liquid staking derivatives. The SEC has previously enforced settlements related to staking services, including with Kraken, and influenced Coinbase to limit its staking services in certain states.
ConsenSys’ Response
ConsenSys, led by Ethereum co-founder Joe Lubin, had anticipated the SEC’s move. A representative from the company expressed confidence in their position, arguing that the SEC is overreaching its regulatory authority. “The SEC has been pursuing an anti-crypto agenda led by ad hoc enforcement action,” the representative said. “This is just the latest example of its regulatory overreach.”
Legal and Market Repercussions
The lawsuit comes shortly after ConsenSys announced that the SEC had ended other investigations related to Ethereum. However, the recent lawsuit extends the SEC’s scrutiny to MetaMask’s functionalities. ConsenSys had previously filed a lawsuit in April seeking judicial relief against the SEC’s potential classification of MetaMask as a broker and its staking service as violating securities laws.
“We are confident in our position that the SEC has not been granted authority to regulate software interfaces like MetaMask,” stated the ConsenSys representative. “We will continue to vigorously pursue our case in Texas for a ruling on these issues because it matters not only to our company but the future success of web3.”
Conclusion
The SEC’s action against ConsenSys underscores the ongoing regulatory challenges facing the cryptocurrency industry. As the legal battle unfolds, the outcome could have significant implications for the broader crypto market, particularly in the areas of staking services and the classification of digital assets as securities.
