Key Takeaways
- 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.
Dr. Lorena Nessi is an award-winning journalist and media technology expert with 15 years of experience in digital culture and communication. Based in Oxfordshire, UK, she combines academic insight with hands-on media practice.
She holds a PhD in Communication, Sociology, and Digital Cultures, and an MA in Globalization, Identity, and Technology.
Lorena has taught at Fairleigh Dickinson University, Nottingham Trent University, and the University of Oxford. She is a former producer for the BBC in London, with additional experience creating television content in Mexico and Japan.
Her research focuses on digital cultures, social media, technology, capitalism, and the societal impact of blockchain innovation.
She has written extensively on digital media and emerging technologies, with her work featured in both academic and media platforms. Her Web3 expertise explores how blockchain technologies shape culture, economics, and decentralized systems.
Outside of work, Lorena enjoys reading science fiction, playing strategic board games, traveling, and chasing adventures that get her heart racing. A perfect day ends with a relaxing spa and a good family meal.
