Metamask sued by SEC, the future direction of Web3 raises follow

As the industry is still closely following the attitude of the U.S. Securities and Exchange Commission ( SEC ) towards the ETH ETF, the SEC suddenly filed a lawsuit against a certain blockchain technology company on June 29. This company is a well-known developer of a Web3 wallet, and the SEC accuses its Swap and staking products of violating securities laws, classifying certain liquid staking tokens as unregistered "securities".

This news has caused a stir in the industry. According to the sentiment indicators from a certain data platform, the sentiment index of related projects has seen a significant decline. One project's index dropped from 21 to -9, while another project plummeted from 33 to -69, indicating that market sentiment has shifted from relatively positive to extremely negative.

The price of the coin also fluctuated accordingly. Data shows that on the day the lawsuit news was announced, the price of a certain project dropped from a high of $2.43 to a low of $1.86, a decrease of over 23%.

As the wallet application with the largest user base in the Web3 space and an important participant in the ETH staking ecosystem, these projects facing lawsuits will undoubtedly cast a shadow over their development prospects and the future of the entire industry.

Long-standing legal disputes

On April 25 this year, this blockchain company filed a lawsuit in the U.S. District Court for the Northern District of Texas due to the SEC's attempt to classify Ethereum (ETH) as a security. The company believes that the SEC's actions are inappropriate because ETH does not possess the characteristics of a security, and the SEC had previously stated that ETH is not within its regulatory scope.

Event Origin

On April 10, the SEC sent a "Wells Notice" to the company, indicating that it may take enforcement action due to potential violations of federal securities laws related to its wallet product's Swaps and Staking features. A Wells Notice is a warning from the SEC prior to formal enforcement action, allowing the party under investigation to provide a written or oral defense.

Litigation Focus

The SEC believes that the relevant functions of the wallet involve unregistered securities trading, violating federal securities laws. However, the company argues that the SEC's stance on whether certain tokens are securities is unclear, and thus decided to resort to the courts. The company insists that Ethereum should not be considered a security and that its wallet functions do not involve securities trading.

The SEC's lawsuits typically revolve around the following points:

1. Unregistered Securities Offering: Accusations that the company did not comply with the registration requirements of U.S. securities laws during certain token offerings.
2. Misleading investors: Claiming that the company misled investors during the token issuance process or did not adequately disclose risks.

Potential Impact

If the court rules that Ethereum is a security, its trading in the United States will need to follow procedures similar to stocks, which will have a significant impact on exchanges and large institutional holders, while potentially affecting the approval process of ETH ETFs.

This lawsuit could have widespread implications:

1. For the sued company: may face hefty fines, investor compensation, and business adjustments.
2. For the cryptocurrency industry: it may become a landmark event for the SEC to strengthen regulation, prompting other companies to reassess compliance.
3. Market Reaction: This may trigger short-term market volatility, especially for projects and tokens related to the sued company.

Escalation of Contradictions

In the early litigation, the company questioned the SEC's position. On June 18, the SEC provided a vague response, stating that it would not recommend taking enforcement action against the company based on current information, but this does not mean the investigation is abandoned.

Legal Advisor's Opinion

The company's legal advisor stated that the entire investigation (not just against the company) has concluded. However, this does not mean that the SEC will not file lawsuits against other Ethereum-related parties.

Different Interpretations

Some argue that the SEC's statement did not explicitly indicate the "end" of the investigation. A legal expert pointed out that this merely means the SEC will not temporarily bring lawsuits against other Ethereum-related parties, but according to the SEC's enforcement manual, the conclusion of an investigation does not equate to a complete termination of the investigation.

Industry Impact

Currently, the SEC's lawsuit against the company seems to have become a foregone conclusion. The industry is more concerned about whether this will affect other staking service providers and the final approval of the ETH ETF. Some legal experts believe that the SEC's investigation into these activities falls under an independent category and will not affect the conclusion of the Ethereum 2.0 related investigation.

Summary

Although the details of the lawsuit have not been fully disclosed, it is certain that the integration of Web3 with the real world is becoming increasingly close, and relevant policies and regulations have made it difficult to completely exclude Web3. This is something we should remain optimistic about.

The dispute between the SEC and the company reflects the complex challenges faced by the cryptocurrency industry in terms of legal and regulatory issues. As more regulatory policies are introduced, seeking a balance between innovation and compliance will become a key issue for the entire industry. We look forward to the final outcome of this case, hoping it can provide valuable references for the healthy development of the industry.