In a recent lawsuit against Consensys, the SEC clarified that cryptocurrencies like Terra Luna Classic (LUNA), Polygon (MATIC), The Sandbox (SAND), Chiliz (CHZ), and Decentraland (MANA) are classified as securities.
The SEC claims these tokens were sold as investment contracts, making them subject to securities laws. Consensys, which facilitated trading through its MetaMask Swaps platform, is accused of promoting these assets with promises of future profits.
SEC Identifies MATIC and MANA as Securities in Recent Lawsuit
One of the tokens in question is MATIC, the native token of Polygon, an Ethereum scaling blockchain platform. Polygon positions MATIC as crucial for network transactions and governance, offering incentives through staking mechanisms and other economic activities.
The SEC argues that MATIC has been marketed and sold as an investment vehicle since its inception, with investors expecting its value to increase due to Polygonâs development and expansion efforts. The SEC highlighted MATICâs whitepaper, which states that MATIC Tokens are essential for economic incentives on the Polygon network, and without them, there would be no motivation for users to participate or provide services.
Additionally, Polygon revealed funding raised from prominent and celebrity investors. The SEC also considered statements from Sandeep Nailwal, Polygonâs co-founder, who in a November 2022 tweet expressed a strong ambition for Polygon to achieve a top position alongside Bitcoin and Ethereum. Such marketing and statements have influenced the SECâs decision.
Similarly, MANA, the digital currency of Decentraland, a virtual reality platform on Ethereum, has been classified as a security by the SEC. MANA facilitates transactions within the Decentraland ecosystem and allows holders to participate in governance and content creation. The SEC pointed to the sale of MANA tokens during its ICO and their trading on platforms like MetaMask Swaps, noting these activities were conducted with an understanding of potential profit from Decentralandâs growth and adoption.
SEC Includes CHZ, SAND, and LUNA in Securities Classification
Another token under scrutiny is CHZ, the utility token for Chiliz. Used on the Socios platform for fan engagement in sports and entertainment, CHZ allows fans to purchase and influence decisions related to their favorite teams through voting rights and rewards programs. The SEC alleges that CHZ was promoted as an investment opportunity, with funds explicitly raised for platform development, user acquisition, and marketing efforts, all contributing to potential increases in CHZâs value.
The SECâs litigation also highlights SAND, the token of The Sandbox, a blockchain-powered virtual gaming platform. The SEC argues that SANDâs initial offering portrayed it as an investment vehicle, making it subject to securities regulations due to anticipated returns linked to the platformâs success.
Lastly, Terra Luna Classic (LUNA), the native token of Terra, is included in the SECâs classification as a security. LUNA facilitates stablecoin transactions and governance within Terraâs ecosystem. The SEC asserts that LUNAâs issuance and trading involved expectations of profit based on Terraformâs development efforts and the market adoption of Terraâs stablecoin solutions.
The SEC noted that in 2021, Terraformâs head of business development referred to LUNA as âequityâ in their company, and CEO Do Kwon had commented on LUNAâs long-term value growth. Terraformâs marketing emphasized their teamâs expertise, contributing to the Federal Court for the Southern District of New Yorkâs ruling on December 28, 2023, that LUNA and wLUNA were sold as investment contracts. The SEC intends to uphold this ruling.
Important:Â Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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