A U.S judge has granted a request by software firm Consensys that sought an expedited schedule in the company’s lawsuit against the U.S. Securities and Exchange Commission (SEC).

Judge Reed O’Connor, in a filing on July 1, approved a timeline in which the court will now consider the merits of Consensys’ case against the regulator. Bill Hughes, senior counsel for Consensys, shared some details of the judge’s ruling via X on July 2.

“Important News about Consensys v. Gensler.  Judge O’Connor granted our request that he consider the merits of our case on an expedited basis:  whether the SEC has Congressional authority to regulate MetaMask as a securities broker and issuer,” Hughes said.

When is the verdict likely?

According to Hughes, the above issues are now set for consideration alongside any arguments from the SEC that Consensys’ case against the agency should not be allowed.

Per a timeline of the expected proceedings, the SEC has until July 29 to file its response. Meanwhile, September 20, 2024 is the deadline for filing opening briefs on the dispositive motions.  should be filed latest by September

In the filing at the U.S. District Court for the Northern District of Texas, Judge O’Connor also ordered that any amicus briefs be filed on or before October 4 and opposition briefs not later than November 1, 2024.

Hughes believes a ruling on the case could come in December, with this looking likely to come around Christmas.

Consensys vs. SEC – lawsuit and counter lawsuit

Judge O’Connor’s verdict comes a few days after SEC sued Consensys over its MetaMask platform and the staking services related offerings.

Remember that Consensys had already filed a lawsuit against the SEC in April. In the lawsuit, the company asked for a ruling that Ethereum is not a security and that MetaMask is not a broker dealer.

Consensys announced that the regulator had dropped its investigation into Ethereum 2.0 in June, only for the SEC to file its own lawsuit accusing Consensys of securities violations. Specifically, the SEC claims MetaMask is an unregistered broker and is offering unregistered securities.

Lido DAO (LDO) and Rocket Pool (RPL) prices are sharply down on Friday. At the time of writing, LDO and RPL are 15% and 10% in the red respectively, with these losses coming as the market reacts to latest regulatory related news.

Ethereum (ETH) price also slipped, shedding nearly 3% while Maker (MKR), Uniswap (UNI) and Arbitrum (ARB) also traded lower. The fall can be attributed to the US Security and Exchange Commission (SEC) suing Consensys, the Ethereum software company behind the MetaMask crypto wallet.

SEC sues Consensys after ending Ethereum 2.0 investigation

SEC’s conclusion of its probe into Ethereum 2.0 gave hint that the regulator had flipped its outlook on altcoin. It’s notable that earlier in May, the SEC approved spot Ethereum ETFs for the US market.

However, an overhang still remained – the securities watchdog’s Wells Notice against Consensys. This meant potential enforcement action, with SEC having outlined its view regarding MetaMask, Consensys’ crypto wallet and staking service platform.

Lido and Rocket Pool prices plummet

Lido (LDO) and Rocket Pool (RPL) are some of the Ethereum related cryptocurrencies that surged a few days despite a marketwide dip. The gains followed Consensys’ announcement that the SEC had ended its Ethereum 2.0 probe.

LDO rose from around $1.85 to highs of $2.40 amid the major win for Ethereum, while RPL jumped from $26.50 to above $30.00 as the news added to a confluence of other positive catalysts to propel the altcoins higher.

What the SEC said about Lido and Rocket Pool

In today’s lawsuit, filed at the United States District Court Eastern District of New York, the SEC alleged “Consensys violated the federal securities laws” after it failed to register as a broker dealer and for offering unregistered securities.

“Specifically, Consensys has offered and sold tens of thousands of securities for two issuers: Lido and Rocket Pool,” SEC’s complaint reads.

SEC also said Lido and Rocket Pool staking operations with ETH means investors expect to earn profits, and these come with the two protocols’ managerial efforts.

Following the SEC lawsuit where Consensys is accused of operating as an unregistered broker through its MetaMask software, the firm has issued a response.

The SEC accused MetaMask of carrying out activities similar to securities brokerage without the appropriate registrations through its swap and staking services. Moreover, this legal action, filed in the U.S. District Court for the Eastern District of New York, follows a Wells notice Consensys received in April.

SEC’s Lawsuit Against Consensys

According to the SEC, Consensys, via MetaMask, facilitated over 36 million crypto asset transactions, including 5 million that involved crypto asset securities, without the required registration. These activities are said to have earned Consensys more than $250 million in transaction fees.

The SEC is specifically concerned about MetaMask’s Swaps and Staking services as these, in the view of the regulator, involve the sale of unregistered securities tokens, including CHZ, LUNA, MATIC, MANA, and SAND.

🚨NEW: The @SECGov has formally charged @Consensys with violating securities laws by operating as an unregistered broker dealer and engaging in the offer and sale of securities through its @MetaMask platform.

This was expected, following the Wells notice Consensys received in… pic.twitter.com/1Fi4cvp3ek

— Eleanor Terrett (@EleanorTerrett) June 28, 2024

Besides directly facilitating transactions, MetaMask Swaps is alleged to act as an intermediary by searching for the best exchange rates and managing customers’ assets through smart contracts. The staking aspect of MetaMask, which involved collaborations with entities such as Lido and Rocket Pool, reportedly also involved the offer and sale of securities through staking programs that were also unregistered.

Consensys’s Defense and Legal Strategy

As a result of the SEC’s legal actions, Consensys has come out in support of their legal stance, claiming that the SEC cannot regulate software interfaces like MetaMask as brokers. The company has decided to go to court in Texas for this very matter, stressing that this case is not only vital for Consensys but for the entire web3 industry.

Consensys claims that what the SEC has done is to overstep its regulatory mandate and change the legal precedent that has been set. The company has taken the position that as a software interface it does not translate to being a securities broker hence clearing up the allegations.

Consensys fully expected the SEC to follow through on its threat to claim our MetaMask software interface must register as a securities broker. The SEC has been pursuing an anti-crypto agenda led by ad hoc enforcement action.

This is just the latest example of its regulatory…

— Consensys (@Consensys) June 28, 2024

The legal conflict with the SEC is taking place at the background of the growing pressure from the regulatory authorities on the cryptocurrency market. This lawsuit is similar to other high-profile cases such as the current case against Coinbase. Consensys has also previously sued the SEC in Texas claiming that MetaMask Swaps and Staking are not brokers as they are software tools, with reference to the case SEC v. Coinbase.

Read Also: SEC Sues ConsenSys For Conducting Securities Via MetaMask

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Kelvin is a distinguished writer specializing in crypto and finance, backed by a Bachelor’s in Actuarial Science. Recognized for incisive analysis and insightful content, he has an adept command of English and excels at thorough research and timely delivery.

The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.