Ripple CTO David Schwartz has backed ConsenSys, the developer of the MetaMask crypto wallet, which is being sued by the SEC for operating as an unregistered broker.

According to the complaint filed by the US Securities and Exchange Commission (SEC), ConsenSys’ transactions through the MetaMask wallet constitute securities transactions. Swaps and staking services imply an expectation of profits from the efforts of others, the regulator insists.

David Schwartz disagreed with the agency’s position and compared ConsenSys’s activities to the diamond industry. Schwartz cited the example of De Beers, a corporation that mines, processes, and sells natural diamonds. Just as the company’s efforts do not determine the profits of diamond owners, the efforts of MetaMask do not determine the profits of users, Schwartz explained.

He emphasized the differences between investment contracts and business contracts. A business contract does not determine the profits that users receive, and MetaMask takes on some responsibility for providing services to users. The source and amount of profits they receive are outside of MetaMask’s control and do not depend on its efforts, Schwartz emphasized. In other words, the profits received from MetaMask’s services are not the result of ConsenSys’ efforts, but are formed depending on external market conditions and user activity.

“If all the people who have assets perform 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.

Ripple CTO recently compared the SEC’s approach to cryptocurrencies to China’s regulation of the industry. Schwartz noted that Chinese authorities have been banning and lifting the ban on crypto trading, a tactic that resembles deliberate market manipulation.