Solana and Other Tokens Not Necessarily Off SEC’s Radar, Say Crypto Executives

The U.S. Securities and Exchange Commission (SEC) may not have exempted Solana from being classified as a security, despite its recent withdrawal of a request for a court ruling on this issue in its case against Binance on July 30.

Jake Chervinsky, chief legal officer at Variant Fund, a crypto-focused venture capital firm, commented in a post on July 30 that there’s no indication the SEC has changed its stance on Solana’s status as a security. Chervinsky’s remarks followed the SEC’s move to amend its complaint concerning “Third Party Crypto Asset Securities,” signaling that it no longer seeks a court determination on whether certain tokens, including Solana, are securities.

Chervinsky did not elaborate on the SEC’s litigation strategy but pointed out that the SEC continues to label these tokens as securities in other legal actions, including its ongoing case with Coinbase.

Other industry experts, including Miles Jennings, general counsel and head of decentralization at a16z Crypto, and Justin Slaughter, policy director at Paradigm, echoed Chervinsky’s sentiments. Slaughter suggested that some observers might be “overreading” the SEC’s filing, interpreting it as the agency stepping back from its position on Solana and other tokens.

Jennings explained that Judge Amy Berman Jackson had set a challenging standard for the SEC to meet the Howey test in the Binance case, making it not worth the effort to argue that these tokens are securities. In contrast, Judge Katherine Polk Failla, who is overseeing the Coinbase lawsuit, appears more supportive of the SEC’s viewpoint, which could explain why the SEC did not pursue the same argument in the Binance case.

Jennings expressed skepticism about the SEC’s ability to convincingly link token sales on secondary markets to the managerial efforts of token issuers. He also noted that his speculations are based on insider knowledge of the SEC’s internal deliberations.

The SEC’s lawsuit against Binance had initially identified several tokens as securities, including Solana (SOL), BNB, Cardano (ADA), Polygon (MATIC), Sandbox (SAND), Decentraland (MANA), and Axie Infinity (AXS). Overall, the SEC has classified at least 68 tokens as securities, impacting over $100 billion in cryptocurrency market value.