Lawyer Says SEC Unlikely Changed Stance on Whether Solana is a Security or Not

The news earlier this week that the SEC had sought to amend its complaint against Binance, potentially removing the requirement for the judge to decide the security status of several cryptocurrencies including Solana (SOL), had many people believing the SEC had decided these assets were, in fact, not securities.  

But lawyer and Chief Legal Officer (CLO) at Variant Fund, Jake Chervinsky, says there’s no reason to believe the SEC has changed its stance on SOL or any other cryptocurrency named in the Binance case. 

Instead, Chervinsky says the SEC’s back down in the Binance case is purely a “litigation tactic” to make their case against Binance more winnable and he notes the regulator continues to refer to many of these cryptocurrencies as securities in other legal cases, including its case against Coinbase.

Related: Reports Say SEC May Intend to Back Down on Claiming SOL, ADA, MATIC are Securities

Binance Back Down Simply Legal Manoeuvring and Politics 

Posting on X / Twitter yesterday, Chervinsky shared his thoughts on the SEC’s back down in its case against Binance, saying it’s essentially meaningless with regard to whether the regulator believes Solana is a security:

There is no reason to think SEC has decided SOL is a non-security. That they don’t want to do discovery on a dozen tokens in the Binance case appears to be a litigation tactic, not a change in policy. Note the SEC still calls these tokens securities in the other exchange cases.

Jake Chervinsky, Variant Fund CLO

Others also chimed in in agreement with Chervinsky. Justin Slaughter, policy director at Paradigm and previously a senior adviser at the SEC, pointed out many people are “overreading” the SEC’s actions, emphasising that they don’t necessarily have implications beyond the Binance case:

A lot of people are overreading this filing. The SEC is not saying that it will not longer take the position that Solana and the other tokens are not securities, but merely that it won’t see(k) to prove such tokens are securities in this, the Binance case.

Justin Slaughter, Policy director, Paradigm

Meanwhile, Miles Jennings, general counsel at web3 venture fund a16z Crypto, said the explanation for the SEC’s backdown in the Binance case is simply “politics”. Jennings added that the judge in the Binance case has imposed a higher standard for the SEC to establish that Solana (and the other cryptocurrencies in the case) are securities than other judges have in other cases, so the regulator decided to remove that aspect of its complaint to simplify the case and increase its chances of getting a win:

As compared to the judge in Coinbase, the judge in Binance set a higher bar for establishing that Howey was satisfied with respect to secondary transactions. So, the SEC is opting to forego their unbounded legal theories in front of a skeptical judge (Jackson), but will still pursue those claims in front of a judge that’s inclined to agree with them (Failla). These antics are further evidence that these enforcement actions are about lawfare, not the rule of law.

Miles Jennings, General counsel at a16z Crypto

Many Tokens Affected Beyond SOL

Although most of the talk is about the implications for Solana, there are several other cryptocurrencies listed in the Binance case which could potentially be impacted, including BNB (BNB), Binance USD (BUSD), Cardano (ADA), Polygon (MATIC), Cosmos (ATOM), The Sandbox (SAND), Decentraland (MANA), Axie Inifinity (AXS) and COTI (COTI). Including Solana, these cryptocurrencies currently have a combined market cap of over US$100 billion per data from CoinGecko.

Related: CFTC “Happy” to Take Over from SEC as Crypto Regulator, Says 80% of Coins are Commodities

According to CoinDesk, as of mid-2023 the SEC had alleged that 68 cryptocurrencies are unregistered securities across all of its litigation efforts against the digital asset industry.