The U.S. Securities and Exchange Commission has filed a lawsuit against Consensys, the provider of Ethereum software, regarding its MetaMask service. The SEC claims that MetaMask is operating as an unregistered broker and has been involved in the sale of securities. The lawsuit also targets two Ethereum staking services, Lido (LDO) and Rocket Pool (RPL), which are third-party platforms used by MetaMask for its staking feature.
MetaMask is a widely used wallet for Ethereum and various other blockchains. In addition to storing cryptocurrency from other platforms, MetaMask allows users to buy and sell digital assets directly through its “Swaps” service. This feature is one of the focal points of the SEC’s lawsuit, which was filed in the U.S. courthouse in the Eastern District of New York.
Consensys earns a fee for providing the Swaps service, and according to the SEC, the company facilitated over 36 million crypto transactions in the past four years. The SEC highlighted that at least 5 million of these transactions involved crypto asset securities such as Polygon (MATIC), Mana (MANA), Chiliz (CHZ), the Sandbox (SAND), and Luna (LUNA). The SEC indicated that other digital assets could also be classified as securities.
The SEC also raised concerns about MetaMask’s staking feature, which allows users to deposit assets to secure the Ethereum blockchain in exchange for interest. This feature relies on third-party platforms like Lido and Rocket Pool. Users can deposit assets into these platforms and receive a liquid staking token in return, which is tradeable.
The SEC views the liquid staking tokens offered by Lido and Rocket Pool as investment contracts and unregistered securities. Consensys has been selling these tokens on behalf of the staking program providers. While staked tokens are typically locked up and cannot be traded, liquid staking tokens can be freely bought and sold.
A representative for Consensys expressed that the company anticipated the SEC’s lawsuit regarding MetaMask and criticized the SEC’s regulatory actions against the crypto industry. This lawsuit follows Consensys’ announcement that the SEC had concluded its investigations into the company related to Ethereum.
Consensys had previously filed a lawsuit against the SEC in Texas, seeking relief from potential claims that MetaMask is a broker and that its staking service violates securities laws. The company’s stance is that the SEC does not have the authority to regulate software interfaces like MetaMask. Consensys remains committed to defending its position in court.
The lawsuit highlights the ongoing regulatory challenges faced by companies operating in the crypto space. The outcome of this legal battle could have significant implications for the future of decentralized finance and the broader cryptocurrency industry.