The SEC's Evolving List of Cryptocurrencies Deemed Securities

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The U.S. Securities and Exchange Commission (SEC) has significantly expanded its regulatory oversight of the digital asset space. Through a series of high-profile lawsuits and enforcement actions, the agency has now classified at least 67 different cryptocurrencies as securities. This collective grouping represents a substantial portion of the market, with a combined market capitalization exceeding $100 billion.

This evolving list underscores the SEC's firm stance on applying existing securities laws to the crypto industry, primarily guided by the Howey Test. For investors and projects alike, understanding this landscape is crucial for navigating compliance and market dynamics.

The Major Lawsuits: Binance and Coinbase

The SEC's most recent and impactful actions came in consecutive lawsuits against the world's largest crypto exchange, Binance, and the largest U.S.-based exchange, Coinbase. These cases served as a catalyst for adding numerous prominent tokens to the securities list.

In its complaint against Binance, the SEC identified several tokens as securities:

Simultaneously, the lawsuit against Coinbase named an additional set of assets:

Both lawsuits collectively targeted other major altcoins, bringing them under the SEC's scrutiny as unregistered securities. These included Solana (SOL), Cardano (ADA), Polygon (MATIC), Filecoin (FIL), The Sandbox (SAND), Decentraland (MANA), and Axie Infinity (AXS). The immediate market reaction was highly volatile, with many of these assets experiencing sharp price declines. This was further exacerbated when online brokerage Robinhood announced the delisting of SOL, ADA, and MATIC for U.S. customers in response to the regulatory pressure.

A Comprehensive History of SEC Enforcement Actions

The Binance and Coinbase cases are merely the latest in a long line of SEC actions. The agency has been methodically defining the regulatory perimeter through lawsuits and settlements for years. The following cryptocurrencies have been deemed securities in previous cases:

Key ICO and Enforcement Cases:

Projects from the Bittrex Exchange Case:

Tokens from the Coinbase Insider Trading Case:

Additional Notable Cases:

The Case of Mirror Protocol mAssets

In its case against Terraform Labs, the SEC also targeted the Mirror Protocol, a decentralized finance (DeFi) platform that allowed the trading of synthetic assets called mAssets. The agency classified 13 of these mAssets as securities because they were designed to mirror the price of U.S.-listed securities and exchange-traded funds (ETFs).

The mAssets deemed securities include:

This action demonstrates the SEC's view that synthetic products tracking traditional securities fall squarely within its regulatory purview.

Implications for the Crypto Market

The SEC's expansive list has profound implications. Projects deemed securities must register with the SEC or qualify for an exemption, processes that are costly, time-consuming, and often at odds with the decentralized nature of many cryptocurrencies. For exchanges, listing these tokens becomes legally perilous without the proper registrations in place.

This regulatory pressure creates significant uncertainty, often leading to market volatility and forcing service providers to reevaluate their trading offerings. The industry continues to grapple with the need for clear regulatory frameworks that protect investors without stifling innovation.

Frequently Asked Questions

What does it mean for a cryptocurrency to be deemed a security?
It means the SEC believes the asset meets the criteria of the Howey Test, classifying it as an investment contract. This subjects it to federal securities laws, requiring registration, disclosure, and adherence to regulations designed to protect investors.

How does the SEC decide which cryptocurrencies are securities?
The primary tool is the Howey Test, a Supreme Court case-derived standard. An asset is considered a security if it involves an investment of money in a common enterprise with an expectation of profits predominantly from the efforts of others.

Can a cryptocurrency change its status from a security to a non-security?
Theoretically, yes. A project could become sufficiently decentralized over time, meaning the efforts of a central group are no longer the primary driver for investors' profits. However, this is a complex and untested legal argument with no clear precedent for success with the SEC.

What happens to a cryptocurrency after it is labeled a security?
The issuing entity typically faces an SEC lawsuit for selling unregistered securities. Consequences can include fines, restitution to investors, and mandates to register. Exchanges may delist the token to avoid regulatory action themselves.

Does this mean these cryptocurrencies are illegal?
Not necessarily. It means they were offered and sold without complying with securities laws. The path forward usually involves working with the SEC to reach a settlement that includes compliance measures, rather than the asset itself being outlawed.

Where can I find the official, updated list from the SEC?
There is no single, official "SEC list." The classifications are made through individual complaints, lawsuits, and settlements. The most accurate way to track this is by reviewing the litigation releases and complaints published by the SEC. To stay informed on regulatory developments and their market impact, you can explore more strategies for navigating this complex environment.