SEC Clarifies Why Terra Luna Classic, Polygon & 3 Other Crypto Are Securities

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As a seasoned researcher with extensive experience in the crypto space, I have closely followed the recent SEC litigation against Consensys and its involvement with several cryptocurrencies. The SEC’s stance on the classification of Terra Luna Classic (LUNA), Polygon (MATIC), The Sandbox (SAND), Chiliz (CHZ), and Decentrand (MANA) as securities is a significant development that underscores the evolving regulatory landscape for digital assets.

In a recent lawsuit brought against Consensys by the Securities and Exchange Commission, the regulatory body has made clear its view that certain notable cryptocurrencies – Terra Luna Classic (LUNA), Polygon (MATIC), The Sandbox (SAND), Chiliz (CHZ), and Decentrland (MANA) – fall under the category of securities. The SEC’s stance is based on their belief that these digital assets were originally marketed and sold as investment opportunities.

Based on their assessment, the Securities and Exchange Commission (SEC) considers these cryptocurrencies subject to securities regulations. For clarification, Consensys, a significant player in the crypto industry, is under investigation for enabling the trading of these tokens through its MetaMask Swaps platform.

The SEC contends that the tokens in question were promoted with implied guarantees of future financial gains, instigated primarily through statements made publicly, marketing materials, and the business plans put forth by the token-issuing entities themselves.

Agency Explains Why Certain Crypto Are Securities

The token at hand is referred to as MATIC, which is the indigenous currency of Polygon, a scaled Ethereum blockchain solution. MATIC plays a crucial role in Polygon’s ecosystem, being necessary for network transactions and decision-making processes. Polygon encourages its holders by providing incentives through staking and various economic engagements.

As a researcher, I’ve come across the Securities and Exchange Commission’s (SEC) argument that since its creation, MATIC has been promoted as an investment opportunity. According to them, investors are anticipating a rise in MATIC value due to Polygon’s continuous advancements and growth initiatives. They provided evidence from MATIC’s whitepaper to support their claim.

In simpler terms, the whitepaper states that “Matic Tokens serve as motivators within the Matic Network (now Polygon)…The absence of Matic Tokens means there’s no reason for users to invest time and resources to engage in activities or offer services, contributing to the network’s overall health.”

As a researcher, I’ve come across some intriguing information about Polygon. Along with disclosing funds raised from esteemed and famous investors, Polygon’s co-founder, Sandeep Nailwal, expressed his ambitious vision in a November 2022 tweet. He stated, “I won’t stop until Polygon secures the ‘top 3’ position it aspires for (alongside Bitcoin and Ethereum). No other project comes close.” This determination, coupled with Polygon’s marketing efforts, may have significantly impacted the Securities and Exchange Commission’s (SEC) decision.

Just like MANA, the digital token of Decentraland – a virtual reality platform on Ethereum network, has been labeled as a security by the SEC (Securities and Exchange Commission). MANA serves the purpose of executing transactions inside Decentraland, while also bestowing its owners with the authority to engage in governance matters and generate content.

The Securities and Exchange Commission (SEC) identified the sale and subsequent trades of MANA tokens during their Initial Coin Offering (ICO) and on platforms such as MetaMask Swaps. Furthermore, the SEC emphasized that these transactions were carried out with the expectation of earning profits from Decentraland’s platform development and increasing popularity.

Scrutiny On Terra Luna Classic, Chiliz & The Sandbox

The CHZ token, which serves a functional role within Chiliz, is another significant entity under examination. On the Socios platform, this utility token is employed for fan interaction in the realms of sports and entertainment. Through its usage, fans are granted the opportunity to acquire merchandise and wield influence over their preferred teams via voting privileges and incentive schemes.

According to the SEC’s claims, CHZ was presented as a chance for investment. Monies were specifically designated for enhancing the platform, recruiting users, and advertising purposes. All these aspects could have potentially boosted CHZ’s worth.

In simpler terms, the SEC (Securities and Exchange Commission) is challenging the sale of SAND tokens in The Sandbox’s virtual gaming platform because they were marketed as potential investments with profits linked to the platform’s achievement. As a result, these tokens fall under securities regulations.

In summary, Terra Luna Classic (LUNA) is considered a security by the SEC due to its role in facilitating transactions and governance within the Terra platform. The value of LUNA was driven by investors’ anticipation of profits from Terraform’s development progress and the growing adoption of Terra’s stablecoin offerings.

The SEC noted that in 2021, Terraform’s head of business development classified Terra Luna Classic as an “equity” within their company. Additionally, Do Kwon, Terraform’s CEO, had previously expressed his belief that the value of LUNA would increase over time in parallel with the expansion of the ecosystem. A director expressed in June 2021 that holding LUNA is akin to owning a share of the network.

Furthermore, Terraform highlighted their team’s proficiency in their promotional efforts. These aspects influenced the Southern District of New York Federal Court to declare on December 28, 2023, that LUNA and wLUNA were marketed as investment opportunities. The SEC intends to uphold this decision.

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2024-07-15 10:16