Solana, Cardano, Polygon challenge SEC’s ‘securities’ label

Solana, Cardano and Polygon are pushing back against the U.S. Securities and Exchange Commission’s classification of their tokens as securities.

The companies responded with varying degrees of pushback against the accusation of their tokens being offered and sold as securities on Binance’s platforms without proper registration with the SEC.

The companies’ native tokens, SOL, MATIC and ADA, are among the industry’s top 20 by market capitalization, with over 21 billion combined value, equaling about one-tenth of Ethereum’s total.

In addition to the three major tokens mentioned above, the agency also imposed the “securities” label on tokens such as Filecoin, Cosmos Hub, The Sandbox, Decentraland, Algorand, Axie Infinity and COTI.

The SEC’s lawsuit alleges that Binance and BAM Trading, the operator of Binance.US, operated as unregistered exchanges, broker-dealers and clearing agencies, depriving investors of important information about these securities.

The announcement of the SEC’s enforcement action caused a significant drop in the value of these tokens, per CoinGecko, with Solana being the most affected, losing more than six percent of its value in one hour.

Varying stances

Despite experiencing a significant decline in value over the past week, collectively losing about 30 percent of their value, the three tokens have shown resilience and are expected to make a partial recovery by Sunday, according to CoinGecko.

Cardano was the first to defend its regulatory status. Input Output Global (IOG), the blockchain research and engineering firm behind Cardano, expressed confidence that the SEC’s lawsuits would not impact its operations.

IOG welcomed a collaborative approach with regulators to foster innovation while safeguarding consumers. It emphasized the need for regulatory clarity, saying that enforcement actions alone do not provide the certainty the blockchain industry deserves.

The Solana Foundation, a Swiss-based non-profit dedicated to Solana, said it disagreed with the SEC’s characterization of Solana’s token (SOL) as a security. However, the foundation also said it is committed to working with regulators and stressed that regulatory clarity is a crucial concern for all digital asset participants building in the U.S.

Within the Solana community, discussions are underway regarding the possibility of forking the network, which could help circumvent potential repercussions from FTX’s bankruptcy and prevent a large supply of Solana tokens from flooding the market.

Polygon Labs, the entity behind the Ethereum scaling solution Polygon, meanwhile, did not explicitly deny the security classification of its token (MATIC), but it sought to distance itself from U.S. markets.

The company maintained that Polygon was developed and deployed outside the U.S., emphasizing its global community support. Polygon Labs asserted that it had conducted itself in a manner that did not specifically target U.S.-based individuals.

Delisted from Robinhood

The recent SEC actions have already led the popular trading app Robinhood to announce the discontinuation of support for the three tokens mentioned.

The delisting will take effect on June 27, but until then, investors can continue to buy, sell and hold ADA, MATIC and SOL.

“After the deadline, any ADA, MATIC, and SOL still in your Robinhood Crypto account will be sold for market value, and the proceeds will be credited to your Robinhood buying power,” the company said in a press release.

Robinhood clarified that this decision would not impact any other cryptocurrencies held on its platform. It also said that investors have the option to transfer their ADA, MATIC and SOL to another wallet or crypto firm, except for customers in Hawaii, Nevada and New York.