The Solana Foundation took to Twitter to address for the first time the classification of its native token, Solana (SOL), as a security by the United States Securities and Exchange Commission..
“The Solana Foundation does not agree with the characterization of SOL as a value”says a June 10 statement, noting that it welcomes the commitment of policymakers to achieve legal clarity in the digital asset space.
The Solana native and utility token was publicly launched in March 2020. SOL holders stake the token to validate transactions through their consensus mechanism. The token can also be used to receive rewards, pay transaction fees, and allow users to participate in governance..
The Solana Foundation disagrees with the characterization of SOL as a security. We welcome the continued engagement of policymakers as constructive partners on regulation to achieve legal clarity on these issues for the thousands of entrepreneurs across the US building in the…
— Solana Foundation (@SolanaFndn) June 10, 2023
The Solana Foundation disagrees with the characterization of SOL as a security. We welcome the continued commitment of regulators as constructive partners in regulation to achieve legal clarity on these issues for the thousands of entrepreneurs across the US building in…
The SEC has labeled the SOL token as a security in two separate lawsuits presented on June 5 and June 6 against cryptocurrency exchanges Binance and Coinbaserespectively. The classification is based on several factors, including the expectation of earnings from the efforts of others, as well as how the tokens are being used and traded.
“This classification is significant because it subjects Solana and associated activities to a different set of regulations and compliance requirements.. […] We are actively working with legal experts and are in communication with the SEC to understand and address their concerns,” declared the Foundation in a letter to its community.
Along with SOL, the SEC included nine other cryptocurrencies in the securities classification of the lawsuit against Binance: BNB (BNB), Binance USD (BUSD), Solana, Cardano (ADA), Polygon (MATIC), Cosmos (ATOM), The Sandbox (SAND), Decentraland (MANA), Axie Infinity (AXS) and COTI (COTI) . In its lawsuit against Coinbase, the SEC named 13 cryptocurrenciesincluding the newly classified tokens and adding six more: Chiliz (CHZ), Flow (FLOW), Internet Computer (ICP), Near (NEAR), Voyager Token (VGX) and Nexo (NEXO).
According to the SEC, the term “security” includes an “investment contract” as well as other instruments such as stocks, bonds, and transferable shares. “A digital asset must be analyzed to determine if it has the characteristics of any product that meets the definition of “security” under the federal securities laws”affirms the regulator in its guide to analyze digital assets as investment contracts.
The Solana Foundation conducted private token sales in recent years, meaning it sold securities to institutional investors and venture capital firms. His private sales reportedly performed under a Simple Agreement for Future Tokens (SAFT), which is an issuance of securities for the eventual transfer of digital tokens from crypto developers to investors. As part of the token sales through a SAFT, Solana also filed private offering forms with the SEC, and investors were subject to blackouts.
A public sale of SOL tokens was held during the Solana Initial Coin Offering (ICO) in March 2020, allocating 8 million tokens to the public, or 1.6% of your initial supply of tokens. This token sale raised $1.76 million for the Solana Foundation, at $0.22 each.
In an opinion piece on the latest developments, legal expert and Bloomberg contributor Matt Levine he pointed that previous SOL security offerings should not make the token a security now. “The fact that those tokens are now publicly traded, with less disclosure and fewer safeguards for investors than the SEC would like, is, from the SEC’s perspective, unfortunate. But it’s not exactly Solana’s fault, or rather it is Solana’s fault but in a perfectly legal way,” he declared.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the entire amount invested may be lost. The services or products offered are not directed or accessible to investors in Spain.