The U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Ethereum software provider Consensys on Friday, alleging that its MetaMask service operated as an unregistered broker and facilitated the offer and sale of securities. The suit also targets Ethereum staking services Lido (LDO) and Rocket Pool (RPL), which power MetaMask’s staking feature.
The enforcement action is part of the SEC’s broader effort to classify significant portions of the crypto market as securities. This move comes on the heels of last month’s unexpected approval of an Ether ETF and raises concerns that the SEC might regulate liquid staking derivatives of ETH, such as Lido’s stETH token. The SEC has previously forced settlements related to staking services, including with Kraken, while Coinbase has curtailed its staking services in certain states following agreements with state securities regulators.
MetaMask, the most widely-used wallet for Ethereum and numerous other blockchains, enables users to store and transact digital assets. Its in-app “Swaps” service, which allows users to buy and sell cryptocurrencies directly, is central to the SEC’s lawsuit. The suit was filed in the U.S. District Court for the Eastern District of New York.
According to the SEC, Consensys has facilitated over 36 million crypto transactions through MetaMask over the past four years, with at least 5 million involving “crypto asset securities.” The SEC identified several of these securities, including Polygon (MATIC), Mana (MANA), Chiliz (CHZ), The Sandbox (SAND), and Luna (LUNA). The suit suggests that other digital assets might also be considered securities. Many cryptocurrencies mentioned in the suit have been previously labeled as unregistered securities by the SEC, though some issuing entities have contested this designation.
The SEC also examined MetaMask’s staking feature, which allows users to deposit assets to secure the Ethereum blockchain in exchange for interest. This feature, powered by Lido and Rocket Pool, lets MetaMask users earn a tradable receipt called a liquid staking token in exchange for their deposits.
This latest legal action underscores the SEC’s ongoing scrutiny of the cryptocurrency sector, as it seeks to enforce regulatory compliance across a rapidly evolving market.
