SEC Labels Polygon, Terra Luna, Chiliz, and More as Securities in New Court Filing

• Defi platforms are under regulatory scrutiny.
• The SEC has classified specific tokens as securities.
• The regulator alleges most of the tokens in question were initially offered as investment contracts.

In a new court filing , the U.S. Securities and Exchange Commission (SEC ) explains how Polygon (MATIC), Decentraland (MANA), Chiliz (CHZ), The Sandbox (SAND), and Terra Luna (LUNC) illegally offered securities.

According to the regulator, by legal definition, the way these projects managed their tokens aligned with the criteria for securities, particularly considering investors’ expectations of profits due to their marketing. 

SEC Explains How Polygon, Chiliz, and Others Offered Securities

Recently, the SEC accused Consensys of offering and selling illegal securities through its MetaMask Staking and Swaps platform. In its filing, the regulator convicted a long list of the tokens provided through Consensys’ products as securities and explained its reasoning. 

According to the SEC, most of the tokens in question were initially offered as investment contracts, which classified them as securities by legal definitions. The regulator contended that for each asset, projects gave investors a reasonable expectation of profit. 

The SEC specifically flagged Polygon (MATIC), a leading Layer-2 scaling solution on Ethereum, for the “economic incentives” promises it made in its initial white paper and raising $5 million by allegedly selling investment contracts. The regulator also accused Polygon’s founder of encouraging investors to view MATIC as an investment, citing his previous tweets. 

The SEC made similar claims about Chiliz (CHZ), a sports-focused blockchain, citing its whitepaper and tokenomics, which allocated 58% of the tokens to operating expenses. 

Regarding metaverse tokens such as Decentraland’s (MANA) and The Sandbox’s (SAND), the SEC highlighted that their websites promoted the opportunity for investors to “earn rewards” through their platforms.

As for Terra Luna Classic (LUNC), the SEC argued that the platform marketed the token as a promise of equity for the company. 

Stable Market Reactions

Since the filing, Terra Luna Classic has increased by up to 6%, showing strong market performance despite the disclosure. 

Other tokens the SEC labeled as securities have also shown resilience, with gains ranging from 1.2% to 4%. 

These increases suggest that the filing had not negatively impacted their value at press time. 

However, further market reactions could occur as the implications of the SEC’s classifications become more widely known. The situation can also set a precedent for other DeFi platforms, shaping the regulatory landscape for digital assets.  

About the Author

Lorena Nessi

Lorena Nessi is an award-winning journalist and media and technology expert. She is based in Oxfordshire, UK, and holds a PhD in Communication, Sociology, and Digital Cultures, as well as a Master’s degree in Globalization, Identity, and Technology. Lorena has lectured at prestigious institutions, including Fairleigh Dickinson University, Nottingham Trent University, and the University of Oxford. Her journalism career includes working for the BBC in London and producing television content in Mexico and Japan. She has published extensively on digital cultures, social media, technology, and capitalism. Lorena is interested in exploring how digital innovation impacts cultural and social dynamics and has a keen interest in blockchain technology. In her free time, Lorena enjoys science fiction books and films, board games, and thrilling adventures that get her heart racing. A perfect day for her includes a spa session and a good family meal.

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