SEC Continues Pursuit of Solana in Binance Lawsuit

After a summer of speculation that the U.S. Securities and Exchange Commission (SEC) might ease its stance on certain altcoins like Solana (SOL), the financial regulator has reaffirmed its position, continuing to argue that the sale of SOL constitutes an illegal, unregistered security offering. This week, in an amended complaint against Binance, the SEC expanded on its accusations, signaling that it remains committed to pursuing claims against the token.

While the SEC removed some controversial language from its earlier complaint—particularly descriptions of tokens as “crypto asset securities”—the regulator added new arguments supporting its claims that crypto exchanges violated securities laws by enabling customers to trade SOL.

Solana as an Alleged Security

In the latest filing, SEC lawyers argued that both Solana Labs and the Solana Foundation publicly promoted the idea that trading SOL on U.S.-based exchanges would drive the token’s value higher, positioning SOL as an investment opportunity. “The information Solana Labs and the Solana Foundation publicly disseminated has led SOL holders…to view SOL as an investment,” the SEC stated, adding that investors were led to believe they could profit from the development of the Solana protocol.

Securities laws define such assets, in part, as those that provide passive profits for investors through the efforts of third parties. According to the SEC, Solana’s marketing and ecosystem-building efforts implied that investors could expect to profit from the organization’s actions—making it a potential unregistered security.

A Shift or Strategy?

In July 2023, there were hints that the SEC might step back from its aggressive pursuit of certain altcoins like Solana, Cardano, and Polygon. At the time, some crypto advocates celebrated the potential narrowing of the SEC’s case against Binance, speculating that the regulator might drop its claims related to these tokens. Others, however, urged caution, suggesting that the developments reflected clerical adjustments rather than a strategic retreat.

This week’s amended complaint appears to validate those cautious voices. The SEC has not labeled crypto tokens themselves as securities outright but reiterated that Binance violated federal law by allowing customers to trade Solana, Cardano, Polygon, and seven other crypto assets without proper registration.

Broader Implications for the Crypto Industry

The SEC’s stance on Solana and other tokens is consistent with its broader legal approach to cryptocurrency projects and exchanges. Just last week, the regulator sued Cumberland, a crypto trading firm based in Chicago, alleging that the company violated securities laws by facilitating trades in Solana and Polygon, among other tokens.

The SEC first filed suit against Binance in June 2023, accusing the exchange of operating in blatant disregard of U.S. securities laws by functioning as an unregistered exchange, broker, and clearing agency. The regulator is seeking to permanently bar Binance from conducting these activities without proper registration and is pushing for the company to disgorge ill-gotten gains and pay civil penalties related to its alleged illegal operations.

Political Backdrop and Industry Reactions

The SEC’s aggressive legal stance on cryptocurrency projects has become a major talking point in the 2024 U.S. presidential election. Both Vice President Kamala Harris and former president Donald Trump have suggested that they would take measures to protect the crypto industry if elected. This political backdrop has raised speculation about whether a shift in leadership at the SEC could lead to changes in its approach to cases like Binance’s.

Prominent voices in the industry, such as billionaire entrepreneur Mark Cuban, believe that these lawsuits could be reconsidered depending on the outcome of the election. Cuban and others suggest that a new administration might bring fresh perspectives on cryptocurrency regulation, possibly leading to a more crypto-friendly environment and fewer legal challenges for the industry.

Conclusion

Despite previous indications that the SEC might soften its stance on certain altcoins, the regulator has reaffirmed its commitment to pursuing legal action against Binance, citing the exchange’s handling of Solana and other tokens as violations of U.S. securities laws. As the 2024 presidential election approaches, the future of the SEC’s actions against crypto companies remains uncertain, with potential political changes possibly reshaping the regulatory landscape.