The U.S. Securities and Exchange Commission (SEC) has sued Ethereum software provider Consensys, claiming that its MetaMask service operated as an unregistered securities broker. The SEC’s lawsuit also alleges that MetaMask’s staking feature violated securities laws.
The Allegations
According to the SEC, MetaMask engaged in the offer and sale of securities through its wallet tool. The lawsuit also targets Ethereum staking services Lido (LDO) and Rocket Pool (RPL), which MetaMask uses for its staking feature.
Broader Implications
This enforcement action is part of the SEC’s ongoing efforts to categorize various aspects of the crypto market as securities. The recent approval of the Ether ETF fueled speculation that the SEC might regulate liquid staking derivatives of ETH, like Lido’s stETH token. Previous settlements with Kraken and Coinbase, who ceased staking services in certain states, underscore the SEC’s regulatory push.
MetaMask’s Features and Controversies
MetaMask is a widely used wallet for Ethereum and other blockchains. It allows users to store, buy, and sell digital assets via its “Swaps” service, a key feature in the SEC’s lawsuit. Consensys has facilitated over 36 million crypto transactions in the past four years, with at least 5 million involving “crypto asset securities.”
The SEC’s suit names several cryptocurrencies as unregistered securities, including Polygon (MATIC), Mana (MANA), Chiliz (CHZ), the Sandbox (SAND), and Luna (LUNA). Many of these assets have been previously identified in other SEC lawsuits, though some issuing entities dispute these claims.
Staking Services Under Scrutiny
MetaMask’s staking feature, powered by Lido and Rocket Pool, allows users to secure the Ethereum blockchain in exchange for interest. The SEC alleges these integrations amount to “investment contracts” and views the popular stETH and rETH liquid staking tokens as unregistered securities.
Consensys responded to these allegations, stating they anticipated the SEC’s move. The company believes the SEC’s actions represent regulatory overreach and an attempt to expand its jurisdiction.
Ongoing Legal Battles
This lawsuit follows Consensys’ earlier legal action against the SEC, where it sought judicial relief against the potential designation of MetaMask as a broker and its staking service as a violation of federal securities laws. Consensys continues to challenge the SEC’s authority in regulating software interfaces like MetaMask.
“We are confident in our position that the SEC has not been granted authority to regulate software interfaces like MetaMask,” said a Consensys representative. “We will continue to vigorously pursue our case in Texas for ruling on these issues because it matters not only to our company but the future success of web3.”
