Creators of ADA and SOL tokens, Cardano, IOHK, and Solana fire back at SEC claims following a lawsuit against Coinbse, alleging the exchange trades in the tokens now it considers securities. ADA and SOL experience a sharp drop in value.
On their blog, IOHK goes in an elaborate fashion to criticize the SEC’s decision to sue Coinbase and characterize ADA as a security. The blogpost states that “Under no circumstances is ADA a security under U.S. securities laws. It never has been. Understanding how decentralized blockchains operate is a fundamental component in creating responsible legislation.” The company also added that “This latest filing from the SEC demonstrates that we still have a long way to go in this regard. Regulation through enforcement action does not provide either the clarity or certainty to which both the blockchain industry and consumers are entitled.”
At the same time, Solana takes to Twitter , stating that “The Solana Foundation disagrees with the characterization of SOL as a security. We welcome the continued engagement of policymakers as constructive partners on regulation to achieve legal clarity on these issues for the thousands of entrepreneurs across the U.S. building in the digital assets space.”
The Solana Foundation disagrees with the characterization of SOL as a security. We welcome the continued engagement of policymakers as constructive partners on regulation to achieve legal clarity on these issues for the thousands of entrepreneurs across the U.S. building in the…
— Solana Foundation (@SolanaFndn) June 10, 2023
Despite the backlash from Cardano, IOHK, and Solana, the news of the lawsuit against Coinbase hit the crypto market hard, influencing the value of almost every cryptocurrency on the platform. SOL saw a 29% drop on June 9th taking it from $19.25 to $13.21 in one day, the token has since been in decline. ADA also took a 28% plunge on June 9th, taking its value from $0.32 to $0.23. On June 12th.
On top of that, American financial services company Robinhood announced that it will cease all Cardano (ADA), Solana (SOL), and Polygon (MATIC) trades on its platform. Users can continue to buy, sell, trade, and hold ADA, MATIC, and SOL until the deadline (except residents of Hawaii, Nevada, and Newyork). If users still hold these tokens in their accounts, the tokens will be sold at market value and will be credited to their Robinhood accounts.
On June 5th, the US Securities and Exchange Commission filed a lawsuit against Coinbase, the largest US-based crypto exchange for allegedly illegally trading securities. The lawsuit, riddled with complex details, creates several paradoxes, highlighting gaps in the SEC’s understanding of crypto assets.
The SEC, led by Chair Gary Gensler, filed the lawsuit against the crypto exchange claiming that Coinbase was illegally trading in what the SEC now recognizes as securities, thirteen of them, to be specific. Among those thirteen crypto assets are ADA & SOL, run by Cardano, IOHK, and Solana.
The controversy in the SEC’s lawsuit comes from different facets. First of all, the SEC suddenly declares those crypto assets as securities, just a day after they had filed lawsuits against Coinbase’s biggest rival exchange, Binance. This occurs a few days after the second anniversary of the SEC approving Coinbase’s IPO (COIN) as a crypto exchange. Moreover, the government had actually used Coinbase in the past to trade Bitcoins in their possessions, seized through prior arrests.
The lawsuit has been seen as unjust not only by Coinbase, their customers, and other stakeholders but also by notable members of the US government, Such as US Senator Bill Hagerty who said “The SEC is weaponizing their role to kill an industry. Allowing a company to list publicly and then stonewalling their attempts to register is indefensible.” US Senator Cynthia Lummis also chimed in on the matter saying that “The SEC has failed to provide a path for digital asset exchanges to register, and even worse has failed to provide adequate legal guidance on what differentiates a security from a commodity”.