According to a complaint from the U.S. Securities and Exchange Commission (SEC), ConsenSys' transactions through the MetaMask wallet constitute securities transactions. Swap and staking services imply the expectation of profits earned through the efforts of other parties, the regulator insists.
David Schwartz disagreed with the department's position and compared ConsenSys' activities to the diamond industry. Schwartz cited the example of the De Beers Corporation, which is engaged in the extraction, processing and sale of natural diamonds. Just as the company's efforts do not determine the profits of diamond owners, MetaMask's efforts do not determine the profits of users, Schwartz explained.
He emphasized the differences between investment and business contracts. The business contract does not determine the profit that users receive, and MetaMask assumes some responsibility for providing services to users. The source and the amount of profit they receive are beyond MetaMask's control and do not depend on its efforts, Schwartz stressed. In other words, the profit earned from MetaMask services is not the result of ConsenSys efforts, but is formed depending on external market conditions and user activity.
"If all the people who have assets commit some actions, this is a common enterprise, then we can talk about securities. But tokens managed by smart contacts cannot make the owners of these tokens a single enterprise," Schwartz said.
Recently, Ripple's CTO compared the SEC's approach to cryptocurrencies to industry regulation in China. Schwartz noted that the Chinese authorities sometimes banned crypto trading, then lifted the ban, and this tactic was similar to deliberate market manipulation.