The United States Securities and Exchange Commission (SEC) has not definitively classified Solana (SOL) as a non-security, despite retracting its request for a court ruling on the matter as part of its ongoing lawsuit against Binance. In a recent post, Jake Chervinsky, Chief Legal Officer at Variant Fund, noted that there is no reason to think the SEC has decided SOL is a non-security. He added that the SEC’s decision not to do discovery on a dozen tokens in the Binance case appears to be a litigation tactic rather than a change in policy. This indicates that the SEC still considers those tokens securities in other exchange cases.
The SEC recently sought to amend its complaint in the Binance case regarding “Third Party Crypto Asset Securities.” The updated stance indicated that the SEC no longer seeks a judicial determination on whether the tokens listed in the lawsuit, including Solana, are securities. Miles Jennings, General Counsel at a16z Crypto, and Justin Slaughter, Policy Director at Paradigm, also expressed their views on the matter. Slaughter cautioned against overinterpreting the SEC’s recent filing, emphasizing that it does not signify a definitive decision on Solana’s security status. Jennings mentioned that Judge Amy Berman Jackson had set a high threshold for establishing the Howey test in the Binance case, which may have influenced the SEC’s decision to retract its request.
The SEC’s lawsuit against Binance named several tokens, including Solana, Binance Coin (BNB), Cardano (ADA), Polygon (MATIC), The Sandbox (SAND), Decentraland (MANA), and Axie Infinity (AXS), as securities. At various times, the SEC has identified at least 68 tokens as securities, impacting over $100 billion worth of cryptocurrencies in the market. Meanwhile, a coalition of seven U.S. states has challenged the SEC’s regulation of cryptocurrency, arguing that it constitutes a “power grab” that would stifle innovation, harm the crypto industry, and exceed the agency’s authority. Led by Iowa Attorney General Brenna Bird, the states filed an amicus brief against the SEC’s attempt to regulate cryptocurrencies.
Earlier this year, SEC Commissioner Hester Peirce stated that the regulatory agency is currently operating in an “enforcement-only mode” when it comes to the regulation of cryptocurrencies. Peirce, known for her crypto-friendly stance among the SEC’s commissioners, acknowledged the burden placed on industry participants who constantly worry about avoiding legal disputes. She highlighted the importance of clearer rules to allow industry participants to focus on building rather than navigating legal uncertainties. The SEC recently closed its three-year investigation into Hiro Systems and a separate case involving stablecoin issuer Paxos, indicating instances where the agency chose not to pursue enforcement actions against crypto entities.
In summary, while the SEC has not definitively classified Solana as a non-security, it has retracted its request for a court ruling on the matter during its lawsuit against Binance. The SEC’s decision not to pursue a judicial determination on the tokens listed in the lawsuit does not necessarily mean that SOL and other tokens are considered non-securities. The ongoing challenges to the SEC’s regulation of cryptocurrency by a coalition of U.S. states highlight the regulatory uncertainties and concerns within the crypto industry. The call for clearer rules and a focus on innovation rather than legal disputes is crucial for the growth and development of the crypto market.
