- In a new filing, the SEC labels Chiliz, Polygon, and Terra Luna Classic securities.
- Targeting MetaMask devs Consensys, SEC escalates DeFi crackdown.
- Ether ETF approval in May hints at SECโs shifting stance on alts.
In a leaked court filing, the Securities and Exchange Commission (SEC) has outlined its reasons behind cracking down on several cryptocurrencies, including Polygon (MATIC), Terra Luna Classic (LUNC), The Sandbox (SAND), Decentraland (MANA), and Chiliz (CHZ).
Chiliz, Matic Under Heavy SEC Scrutiny
The SECโs conviction is that these cryptocurrencies have initially been served to investors as investment contracts start the inception of enterprises affiliated with the tokens.
The SEC highlighted the sell-off of 19% of MATICโs supply back in April 2021, when Polygon Labs allegedly raised $5M by sales of unregistered securities on Binance through an Initial Exchange Offering (IEO). Selling at $0.00263, the funds were used to develop the blockchain, court filings show.
Sponsored
Similar claims are made about CHZ, a sports-focused blockchain that has over 100 officially licensed crypto tokens tied to popular sports franchises. Citing Chilizโs whitepaper, the SEC broke down CHZ’s tokenomics, emphasizing a 58% allocation to operating expenses.
SEC Declares LUNC Company Equity?
Referring to Terra Luna Classicโs case, the court filing describes TerraForm Labsโ communication about the original LUNA token as a promise of equity in the company. The 2018 LUNA token sale agreement clearly stated that the funding is โfor the purpose of building and operating systems developed by Terraform,โ the SEC argues.
LUNC’s place in the SECโs puzzle could be different. Just last month, the SEC secured a landmark $4.5 billion settlement with TerraForm Labs, the parent company of LUNA, and other tokens named in the legal document.
In the wake of TerraForm Lab’s bankruptcy earlier this year, the LUNC and USTC tokens will likely be eliminated from circulation, as the digital assets are likely to be used to cover the $4.5 billion fine imposed by Americaโs tireless financial regulators.
On the Flipside
- The lengthy debate about cryptocurrencies sold as unregistered securities didnโt stop the SEC from approving Ether Spot ETFs on May 23, 2024.
- The SEC declared Ether (ETH) a security back in 2023 but closed the investigation in June 2024, concluding that no enforcement action is needed, as Ethereum is a commodity, according to the findings.
Why This Matters
Crypto marketing and business growth often receive legal scrutiny due to unclear regulations. On the other hand, defining the boundary between a security and a commodity can help create a safer environment for crypto investors.
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