SEC's Stance on Solana: Still a Security?

Regulatory AmbiguityMany crypto observers may be “overreading” the security regulator’s latest filing for its Binance lawsuit, suggesting that Solana and other tokens may not be off the hook yet. The United States securities regulator hasn’t necessarily let Solana off the hook as a security despite retracting its request for a court to decide on the matter as part of its Binance lawsuit on July 30.

Expert Opinions

“There is no reason to think the SEC has decided SOL is a non-security,” said Jake Chervinsky, chief legal officer at crypto-focused venture capital firm Variant Fund, in a July 30 X post. Chervinsky’s post refers to the latest response from the US Securities and Exchange Commission, seeking to amend its complaint regarding the “Third Party Crypto Asset Securities,” essentially telling the court it is no longer asking to determine whether the tokens listed in the lawsuit are securities or not.

SEC's Litigation Tactics

While Chervinsky didn’t expand on what that “litigation tactic” may be, he highlighted that the SEC still refers to the same tokens as securities in other crypto exchange lawsuits, including its one with Coinbase. In separate posts, Miles Jennings, general counsel and head of decentralization at a16z Crypto, and Justin Slaughter, policy director at Paradigm, appeared to agree.

Overreading the Filing

Slaughter argued that many are “overreading this filing” and that it doesn’t mean the SEC has decided that Solana and other tokens are not securities. Jennings explained that Judge Amy Berman Jackson had set such a high bar to establish the Howey test in the Binance case that it wasn’t worth the SEC’s time and effort to prove these tokens were securities.

Judge Perspectives

Judge Katherine Polk Failla in the Coinbase lawsuit seems more “inclined” to agree with the SEC’s position — therefore, it isn’t worth making the same request made in the Binance lawsuit. Jennings says he isn’t convinced that the SEC has mounted a strong enough case to establish the connection between token sales on secondary markets and the managerial efforts of token issuers.

Tokens in Question

In its suit against Binance, the SEC claimed several tokens were securities. The list includes Solana (SOL), BNB (BNB), Cardano (ADA), Polygon (MATIC), The Sandbox (SAND), Decentraland (MANA), and Axie Infinity (AXS). The SEC once claimed that at least 68 tokens are securities, affecting more than $100 billion worth of cryptocurrencies in the market.

The SEC's latest actions and comments indicate that Solana and other tokens may still be considered securities, despite recent litigation strategies. Crypto executives and legal experts suggest that the regulatory landscape remains complex and unresolved, with the SEC continuing to assert its position in ongoing lawsuits.