The SEC has filed a fresh lawsuit against Consensys, alleging violations of federal securities laws related to its MetaMask wallet services. Specifically, the complaint focuses on the Swaps and Staking features, which the SEC claims have operated as unregistered broker services since October 2020 and January 2023, respectively.

This lawsuit follows a Wells Notice earlier this year, prompting Consensys to counter with a lawsuit citing the SEC's "aggressive and unlawful" actions. Ethereum saw a slight 2% decrease on the day, but no significant sell-off was observed at the time of reporting.

According to the SEC, Consensys has collected more than $250 million in fees from these activities without offering necessary investor protections. The SEC asserts that MetaMask Swaps functions as a digital platform facilitating transactions in crypto asset securities for retail investors, providing features such as identifying optimal exchange rates, routing orders, managing customer assets, and executing trades with transaction-based fees. The platform's use of smart contracts eliminates the need for investors to directly interact with third-party liquidity providers.

Regarding MetaMask Staking since January 2023, the SEC alleges it has been involved in the unregistered offer and sale of securities through crypto asset staking programs, earning transaction-based compensation as an unregistered broker.

The SEC identifies several digital assets traded on MetaMask Swaps, including MATIC, MANA, CHZ, SAND, and LUNA, as securities sold as investment contracts, promising profits based on issuers’ efforts, similar to assets mentioned in last year's lawsuit against Coinbase.

Furthermore, the SEC contends that staking programs like those offered by Lido and Rocket Pool via MetaMask Staking constitute investment contracts and securities, sold without required SEC registration statements. Consensys, according to the SEC, exercises discretion over third-party liquidity provider selection and the digital assets available for trading, using its market expertise akin to traditional brokers. The company has also implemented a "Token Restriction Policy" to limit certain assets due to potential regulatory concerns.

The SEC seeks permanent injunctions against Consensys for violating securities laws, along with civil monetary penalties and other relief for investors. A jury trial has been requested for this case.

Despite this legal action, Consensys recently received a favorable outcome when the SEC concluded its investigation into Ethereum 2.0, determining that ETH sales do not constitute securities transactions. This decision aligns with the Commodity Futures Trading Commission's classification of ETH as a commodity, following Consensys's inquiry after ETH ETF approvals.

Consensys views this as a victory for Ethereum developers and the industry, arguing that the SEC's aggressive enforcement actions against blockchain developers and technology providers have been unlawful. The company's ongoing lawsuit aims to clarify that user interface software like MetaMask Swaps and Staking does not violate securities laws.

In a recent interview, Consensys's head of litigation, Laura Brookover, emphasized the company's commitment to seeking regulatory clarity, highlighting broader concerns within the crypto community about balanced regulation that supports innovation while ensuring compliance.

The resolution of the Ethereum investigation marks a significant moment, potentially bolstering Consensys's position against the SEC's perceived aggressive treatment of cryptocurrencies.

Consensys's legal battle underscores the tension between regulatory oversight and technological innovation, shaping the future of blockchain technology and its applications. The outcome of this case will be closely monitored by industry stakeholders and regulators, influencing the evolution of blockchain technology and regulatory frameworks.