In a legal showdown, Ripple CTO David Schwartz indirectly expressed support for Consensys Software Inc. following the SEC’s lawsuit against the company. The SEC accused Consensys of operating as an unregistered broker.
SEC Allegations
The SEC alleged that Consensys conducted unregistered securities offerings and sales through the MetaMask platform, specifically targeting the platform’s swapping and staking features. The complaint, filed on Friday, June 28, accused Consensys of engaging in unregistered securities transactions through MetaMask. The SEC argues that MetaMask’s swaps and staking involve pools of assets with expected profits primarily from the efforts of others, thus classifying these activities as securities transactions requiring registration.
Response
During the lawsuit, Ripple’s CTO David Schwartz posted a series of messages on X (Twitter) defending Consensys. He disputed the argument that MetaMask’s services qualify as securities, as people expect to profit from Consensys’s efforts.
He also clarified that agreements providing management and transfer services, if profit sharing is entirely external to the agreement and not due to the efforts of any party, do not constitute investment contracts. Schwartz stated that the profits generated by MetaMask services result from external market conditions and user activities, not Consensys’s efforts.
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Regulatory Pressure and ICO Projects
Schwartz also commented on the ongoing token versus security debate, noting:
“If everyone who owns an asset takes action” as a common enterprise, then everything is a security. Tokens managed through smart contracts cannot make all holders a common enterprise.
With District Judge Amy Berman Jackson aligning with Judge Torres’s stance on procedural and secondary sales, the broader regulatory environment has also evolved.
XRP
. In the Binance v. SEC case, Judge Jackson dismissed the SEC’s claims about secondary sales of
BNB
by non-Binance entities. This ruling sets a significant precedent for ongoing cryptocurrency-related lawsuits in the US.
Companies like Coinbase, Consensys, and Kraken are expected to leverage this decision to strengthen their positions in their respective lawsuits. Through this ruling, SEC lawyers can no longer argue that Judge Torres’s views on secondary sales lack judicial support or acceptance, potentially impacting the future regulatory landscape for cryptocurrencies in the US.
