The current unreleased libwebsockets master branch defines the VERSION macro in its header files. I believe this to be a bug in libwebsockets.

This bug causes compilation of mosquitto with websockets support to fail.

Please use a released version of libwebsockets, either 1.2, 1.3 or 1.4. Mosquitto will compile with all of these versions.

I do not recommend using an unreleased version of libwebsockets, the project is not shy about making ABI/API incompatible changes between releases so it is impractical to provide support for.