However, Wednesday witnessed the potential dimming of Solana’s future as Judge Katherine Polk Failla of the United States Southern District of New York dealt a blow to Coinbase. Her decision to reject Coinbase’s motion to dismiss allows the Securities and Exchange Commission (SEC) to proceed with its case against the crypto exchange titan.
At the heart of the matter are accusations that Coinbase has functioned as an unregistered exchange, broker, and clearing agency, with its Staking Program allegedly involving the unregistered offering and sale of securities.
This choice has big impacts that reach far beyond Coinbase. It particularly matters to the Solana group. The SEC says that both digital currencies are investments. The judge mentions SOL and Chilliz during the case. Judge Failla pointed out SOL (and CHZ) as an example to back the SEC’s claims. The agency only has to show that one of the 13 tokens is a security.
However, Bill Morgan, a lawyer advocating for XRP, provided an extensive analysis of the court’s decision on the platform X (previously named Twitter). He highlighted the thorough evaluation of SOL. Morgan emphasized, “Among these was Solana.
Coinbase Dilemma: SOL Delisting Consideration
The judge found that the SEC reasonably claims that Coinbase facilitated transactions involving crypto-assets deemed ‘securities’. She explicitly acknowledged the SEC’s plausible argument regarding the classification of SOL sales as securities and did not disregard sales on secondary markets as non-securities.”
This observation highlights the increased regulatory scrutiny and the potential risks of reclassification that Solana and similar tokens are facing. Morgan further commented, “This poses a setback for Coinbase and casts doubt on the exemption of SOL sales from being deemed investment contracts. Frankly, if Coinbase maintains consistency with its response to the SEC v Ripple case by delisting XRP, it should consider delisting SOL now.
This evaluation highlights not just the extent of Solana’s fundraising endeavors, but also conforms to the standards set forth by the Howey Test, a yardstick used to ascertain if a transaction falls under the category of a security.
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