SEC vs MetaMask: Is Staking Is Under Fire Again?
Last week, the SEC filed a suit against Consensys, the developer of the popular MetaMask wallet.
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The SEC claims that Consensys, which “markets itself as a leader and innovator in the crypto asset industry”, was offering products that performed age-old functions.
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These products include brokering securities transactions for retail investors and engaging in the offer and sale of securities.
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According to the SEC, Consensys should have registered as a broker, as well as registered the offer and sale of certain securities. The SEC is focused on going after MetaMask Swaps and MetaMask Staking services.
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This is not the first time the SEC has accused staking services of violating securities laws. Back in 2023, the SEC sued Coinbase and Kraken. Meanwhile, the well-known case against Binance involved multiple allegations and ultimately put Binance’s founder CZ in jail.
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Kraken’s case is illustrative. The management of the crypto exchange decided that it was futile to oppose the regulator. As a result, Kraken stopped offering its staking-as-a-service program for U.S. users. The service is still available for customers in other countries. Kraken’s settlement with the SEC also involved payment of $30 million in disgorgement, prejudgment interest, and civil penalties.
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Apparently, Consensys believes that it is in a better position compared to Binance or Kraken. The company has previously sued the SEC in a preventive effort to stop a potential suit against Consensys. As we know now, this attempt has failed, and the regulator proceeded with its own lawsuit against the company.
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Consensys' lawsuit centered on the classification of ETH, arguing that it should be recognized as a commodity rather than a security. The company emphasized that Ethereum is a global computing platform, not an investment scheme. Consensys expressed concerns about the potential designation of ETH as a security, given MetaMask's pivotal role in the ETH ecosystem.
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Taking a look at last year’s cases of Binance, Coinbase, and Kraken, it is obvious that the SEC does not plan to destroy the whole industry or any single coin. Such a plan is impossible both technically and politically as the crypto industry has gained strong momentum and coins have found their place in portfolios of multiple investors of any level, from retail guys to institutional pros.
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The regulator uses lawsuits to get more control over the industry and slow down its development. However, things are not always going in the SEC's favor. In the case of SEC vs Ripple, the regulator has mostly lost the case. The court found out that Ripple violated securities laws when selling XRP to institutional investors but dismissed other charges brought by the regulator.
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In this light, Consensys should have a decent chance for a long and complicated court battle against the SEC. Potentially, the company may try to wait for the changes in the SEC leadership, hoping that new people will be more crypto friendly.
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Talking about ETH, its holders have nothing to worry about. As usual, the case might generate some FUD on Ethereum, which is typical for the industry.
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