The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Ethereum software provider Consensys, accusing its MetaMask wallet service of acting as an unregistered broker in facilitating the offer and sale of securities. The legal action also involves the Ethereum staking services Lido (LDO) and Rocket Pool (RPL) used by MetaMask.
Does MetaMask Little Fox Wallet also involve securities?
MetaMask is widely recognized as the most commonly used wallet for Ethereum and other blockchains. In addition to storing cryptocurrencies, MetaMask also allows users to directly buy and sell digital assets through its “Swap” service. The SEC's lawsuit, filed in the U.S. District Court for the Eastern District of New York, claims that this feature is at the heart of the alleged breach.
Wallet trading functionality involves securities, making Consensys profitable
According to the SEC, Consensys facilitated more than 36 million crypto transactions through MetaMask over the past four years, of which "at least 5 million" involved crypto-asset securities. The wallet’s “Swap” service generates revenue for Consensys, which the SEC believes constitutes brokerage activity without proper registration.
SEC’s Position on Crypto-Asset Securities
The SEC’s lawsuit lists several cryptocurrencies, including Polygon (MATIC), Mana (MANA), Chiliz (CHZ), The Sandbox (SAND), and Luna (LUNA), as unregistered securities. This determination has been disputed by multiple issuing entities in previous SEC cases. The lawsuit suggests that other digital assets may also be classified as securities.
SEC launches review of staking function: pledged tokens are investment contracts
Powered by Lido and Rocket Pool, MetaMask’s staking feature is currently the largest staking service protocol, allowing users to deposit assets to secure the Ethereum blockchain and earn rewards. Users receive liquid staking tokens such as stETH and rETH, which can be freely traded. The SEC considers these tokens to be investment contracts and therefore unregistered securities.
Consensys response: Not surprising
A Consensys representative expressed disappointment but not surprise at the SEC’s action, accusing the agency of regulatory overreach and an anti-crypto agenda. The representative emphasized that MetaMask should not be classified as a securities broker.
(Coinbase sues SEC and FDIC: Failure to cooperate in providing documents in accordance with the law and trying to squeeze out the encryption industry)
Consensys sued the SEC in April, seeking judicial relief against possible SEC claims regarding MetaMask’s brokerage status and its staking services. The lawsuit also seeks to have ether (ETH) declared a non-security and halt the SEC’s investigation into Consensys.
(SEC has given up on pursuing ETH and will still sue MetaMask for its pledge and trading functions)
This article US SEC sues Consensys, targeting MetaMask and Ethereum staking services: Lido, Rocket Pool are all affected. First appeared on Chain News ABMedia.
