Solana Foundation: SOL is not a security

Compile: Deep Chain DCNews

For the first time on Twitter, the Solana Foundation addressed the SEC’s classification of its native token, Solana (SOL), as a security.

“The Solana Foundation disagrees with the description of SOL as a security,” read a June 10 statement, noting that it welcomes the involvement of policymakers in achieving legal clarity in the digital asset space.

Solana's native and utility token launched publicly in March 2020. SOL holders stake tokens in order to validate transactions through its consensus mechanism. The token can also be used to receive rewards, pay transaction fees, and enable users to participate in governance.

**The Solana Foundation disagrees with the characterization of SOL as a security. **We welcome the continued engagement of policymakers as constructive partners in regulation, serving thousands of entrepreneurs across the United States in...

— Solana Foundation (@SolanaFndn) June 10, 2023

The SEC marked SOL tokens as securities in two separate lawsuits filed against cryptocurrency exchanges Binance and Coinbase on June 5 and June 6, respectively. This classification is based on several factors, including the expectation of profit from the efforts of others, and how the token will be used and marketed.

**“This classification is significant because it subjects Solana and related activities to a different set of regulations and compliance requirements. [...] We are actively engaging with legal experts and communicating with the SEC to understand and Address their concerns," the foundation said in a letter to the community. **

Along with SOL, the SEC listed nine other cryptocurrencies in the Binance lawsuit’s securities classification: BNB (BNB), Binance USD (BUSD), Solana, Cardano (ADA), Polygon (MATIC), Cosmos (ATOM), The Sandbox (SAND), Decentraland (MANA), Axie Infinity (AXS), and COTI (COTI). In its Coinbase lawsuit, the SEC named 13 cryptocurrencies, doubling down on the newly classified tokens and adding six: Chiliz (CHZ), Flow (FLOW), Internet Computer (ICP), Near (NEAR), Voyager Token (VGX), and Nexo (NEXO).

According to the SEC, the term "securities" includes "investment contracts," as well as other instruments such as stocks, bonds, and transferable shares. ** "A digital asset should be analyzed to determine whether it has the characteristics of any product that meets the definition of a "security" under the federal securities laws," the regulator noted in its guidance analyzing digital assets as investment contracts.

The Solana Foundation has sold tokens privately over the past few years, meaning it sells securities for institutional investors and venture capital firms. Its private sale was reportedly conducted under a Simple Agreement for Future Tokens (SAFT), a secure offering that ultimately moves digital tokens from crypto developers to investors. In the token sale via SAFT, Solana also filed a non-public offering form with the SEC, and investors were locked in.

A public sale of SOL tokens was held during Solana's March 2020 Initial Coin Offering (ICO), distributing 8 million tokens to the public, or 1.6% of its initial token supply. The token sale raised $1.76 million for the Solana Foundation at $0.22 each.

In an opinion piece on the latest developments, legal expert and Bloomberg contributor Matt Levine noted that **SOL’s previous securities offering should not now make the token a security. ** "From the SEC's perspective, the fact that these tokens are now publicly traded with less disclosure and investor safeguards than the SEC would like is unfortunate. Rana's fault, or rather Solana's fault, but in a perfectly legal way," he said.