The U.S. Securities and Exchange Commission (SEC) sued Consensys, the developer of the popular cryptocurrency wallet MetaMask, alleging it acted as an unregistered securities broker by facilitating the buying and selling of digital assets through its "Swaps" feature.

The Internal Revenue Service (IRS) released a revised version of its proposed regulations on cryptocurrency broker reporting requirements, a move that has been met with cautious optimism by the crypto industry.

The launch of the highly anticipated spot Ether exchange-traded funds in the United States, widely expected to come as early as July 2, has been pushed back over additional scrutiny by the SEC.

Top stories in the Crypto Roundup today:

• SEC Sues Consensys Over MetaMask's ‘Unregistered Offers and Sales of Securities’
• IRS Eases Concerns with Updated Crypto Broker Reporting Guidelines
• Spot Ether ETF Launch Delayed Over SEC Scrutiny

SEC Sues Consensys Over MetaMask's ‘Unregistered Offers and Sales of Securities’

The U.S. Securities and Exchange Commission (SEC) sued Consensys, the developer of the popular cryptocurrency wallet MetaMask, alleging it acted as an unregistered securities broker by facilitating the buying and selling of digital assets through its "Swaps" feature.

The lawsuit also targets Lido and Rocket Pool, third-party staking services that MetaMask integrates for its staking service, and claims that MetaMask's role in these staking services amounts to offering “investment contracts,” suggesting the regulator sees liquid staking tokens such as stETH and rETH as unregistered securities.

The lawsuit comes just weeks after the SEC approved spot Ether exchange-traded funds (ETFs), and represents the SEC’s latest attempt to categorize a portion of the crypto market as securities.

According to the SEC, Consensys has facilitated over 36 million crypto transactions in the past four years, with at least 5 million involving "crypto asset securities." The SEC identified specific tokens including MATIC, MANA, LUNA, CHZ and SAND as potential securities, but suggested the list may be broader. Notably, many of these tokens have been flagged by the SEC in previous actions.

Consensys said the firm “fully expected the SEC to follow through on its threat” to claim MetaMask must register as a securities broker, and argued that the agency is overstepping and attempting to “redefine well-established legal standards” as it expands its jurisdiction via lawsuits.

IRS Eases Concerns with Updated Crypto Broker Reporting Guidelines

The Internal Revenue Service (IRS) released a revised version of its proposed regulations on cryptocurrency broker reporting requirements, a move that has been met with cautious optimism by the crypto industry.

The initial draft, published in August 2023, sparked concern due to its broad definition of a "broker," potentially encompassing non-custodial platforms like decentralized exchanges (DEXs), which could lead to burdensome reporting requirements and privacy-invasive practices.

Under the revised guidelines, centralized exchanges like Coinbase and Kraken will be subject to the new reporting rules, which partially go into effect in 2025, while the rules being implemented on decentralized, non-custodial protocols remain unclear.

The filing details that the "Treasury Department and the IRS would benefit from additional consideration of issues involving non-custodial industry participants.”

Coin Center and other industry groups had previously pushed back against the IRS's initial broad definition of a broker that seemingly roped in non-custodial, self-executing crypto platforms. Last week, the Blockchain Association expressed concern about the potential for hefty compliance costs associated with the rule.

The initial draft not only expanded the definition of a broker but also significantly increased the number of entities required to file 1099 tax forms, including a new crypto-specific form, the 1099-DA, to the point the Blockchain Associated estimated the law could have resulted in 8 billion additional 1099-DA forms and compliance costs reaching $254 billion.

This was due to the broad scope of the reporting requirements, potentially encompassing nearly all blockchain-based asset trades, from non-fungible tokens (NFTs) to stablecoins.

Spot Ether ETF Launch Delayed Over SEC Scrutiny

The launch of the highly anticipated spot Ether exchange-traded funds in the United States, widely expected to come as early as July 2, has been pushed back over additional scrutiny by the SEC.

The debut, delayed after the SEC took more time to review the S-1 registration statements submitted by prospective spot ETH ETF issuers, is now likely to occur sometime in mid-to-late July, or potentially even later this summer.

According to Bloomberg ETF analyst Eric Balchunas, the SEC provided feedback on the S-1 forms and requested resubmissions by July 8. Nate Geraci, president of ETF Store, noted the requested revisions are minor and predicted the SEC will clear issuers for trading within 14-21 days after receiving the revised filings.

This timeline remains uncertain, but the SEC has indicated a potential launch sometime this summer. Earlier in June, based on the lack of significant comments from the SEC on the S-1 filings, Balchunas predicted a launch window in early July.

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