In this article, I will focus on cryptos categorized as securities, looking into the fundraising, token allocation, and profit expectations on which certain cryptocurrencies are being regulated.
For Solana, Cardano, and Polygon, understanding which tokens may be classified as securities is important for investors, developers, and exchanges to know how to legally and securely engage with the crypto space as it continues to develop.
Key Poinst & Cryptos listed As Securities
| Cryptocurrency | Key Point (Why SEC Considers It a Security) |
|---|---|
| Solana (SOL) | Alleged centralized control and fundraising resembling traditional securities |
| Cardano (ADA) | Raised funds through an ICO; SEC claims it meets Howey Test criteria |
| Polygon (MATIC) | Initial token distribution and development funding flagged as investment contracts |
| Filecoin (FIL) | SEC argues its token sale involved expectation of profit from network growth |
| Algorand (ALGO) | Promoted by its foundation with potential for profit, triggering security classification |
| Axie Infinity (AXS) | Used in a play-to-earn model with speculative value, seen as investment-like |
| Sandbox (SAND) | In-game economy and token sales viewed as profit-driven investments |
| Chiliz (CHZ) | Fan token ecosystem with speculative trading and centralized issuance |
| Flow (FLOW) | Associated with Dapper Labs and NBA Top Shot; SEC sees it as part of a profit scheme |
| Near Protocol (NEAR) | Token distribution and marketing suggest investment expectations |
10 Cryptos listed As Securities
1. Solana (SOL)
As a decentralized and distributed open source network, Solana has been used for processing a high number of transactions.
Solana has also been targeting decentralized applications (dApps) and DeFi and has been able to acquire a great number of users and customers.
SOL, the native token is used for staking, governing, and paying transaction fees. Legal scrutiny can take place as a result of the centralized nature of Solana during its initial development, and the token sales and allocation approaches, which can lead to classifying SOL as a security.
| Feature | Description |
|---|---|
| Blockchain Type | High-performance proof-of-stake blockchain |
| Transaction Speed | ~65,000 transactions per second |
| Consensus Mechanism | Proof of History + Proof of Stake |
| Use Cases | DeFi, NFTs, dApps, smart contracts |
| Token Utility | Staking, transaction fees, governance |
| Regulatory Concern | Centralized early development and fundraising may classify SOL as a security |
| Network Strength | Fast, low-fee transactions attract developers and enterprises |
2. Cardano (ADA)
Cardano is a proof-of-stake Blockchain network emphasizing interoperability, sustainability, and scalability. Its native token, ADA, is used in network governance, and facilitates staking rewards.
While ADA is considered widely adopted, regulators might look into overregulation on initial fundraising, promotional activities, and distribution of the tokens.
Currently, the SEC is conducting test analyzes on profit expectations from the system developers on the purchase of ADA.
This has a significant impact on exchanges holding ADA and the potential for securities regulations which affect and modify institutional participation, investments and the use of marketing, and trading strategies.
| Feature | Description |
|---|---|
| Blockchain Type | Proof-of-Stake, layered architecture |
| Transaction Speed | ~250 TPS |
| Consensus Mechanism | Ouroboros Proof-of-Stake |
| Use Cases | Smart contracts, DeFi, identity solutions |
| Token Utility | Staking, governance, payments |
| Regulatory Concern | Initial fundraising and ADA allocation may imply security classification |
| Network Strength | Focus on research-based development and scalability |
3. Polygon (MATIC)
Polygon is an Ethereum layer-2 scaling solution and offers improvements on reducing gas fees and increasing transaction throughput. MATIC, the network’s native token, functions in governance, and as a medium of exchange in transaction fees and staking.
MATIC’s initial sale, as well as the distribution, is used to determine regulatory expectations which is a potential security under U.S. law as an investment contract.
If applicable, trade, listing, and investment will face other higher requirements. Expected profit of System developers directly impacts institutional adoptions, network governance, token issuance, and Polygon’s development team.
| Feature | Description |
|---|---|
| Blockchain Type | Layer-2 scaling solution for Ethereum |
| Transaction Speed | ~7,000 TPS |
| Consensus Mechanism | Proof-of-Stake |
| Use Cases | DeFi, NFTs, scaling Ethereum dApps |
| Token Utility | Staking, transaction fees, governance |
| Regulatory Concern | Initial sale and investor profit expectation could trigger securities classification |
| Network Strength | Reduces Ethereum gas fees and improves throughput |
4. Filecoin (FIL)
Filecoin is a decentralized storage network. Users pay to store data and miners earn FIL token by provide storage capacity.
The token monetizes participation on the network and guarantees availability of data in a decentralized manner.
FIL could be classified as a security due to the manner in which raise their funds, initial coin offering (ICO), as well as the expectation of profits by investors.
Should regulatory bodies consider FIL a security, exchanges will need to manage their trading in compliance with securities laws, and investors would incur possible legal and tax liabilities.
This ultimately affects Filecoin’s use and adoption in DeFi and the storage markets as well as enterprise applications.
This is due to the need for regulatory compliance on a clear policy for prolonged participation of institutions. This is also the reason for limited institutional participation on the enterprise side.
| Feature | Description |
|---|---|
| Blockchain Type | Decentralized storage network |
| Transaction Speed | Depends on storage and retrieval operations |
| Consensus Mechanism | Proof-of-Replication + Proof-of-Spacetime |
| Use Cases | Decentralized storage, enterprise solutions |
| Token Utility | Mining rewards, network payments |
| Regulatory Concern | Initial coin offering and profit expectation could make FIL a security |
| Network Strength | Large decentralized storage capacity with robust incentives |
5. Algorand (ALGO)
Algorand aims to create a highly scalable, proof-of-stake blockchain, facilitating extremely rapid, secure transactions. ALGO is used for exchanges, staking rewards, as well as governance.
Certain issues arise concerning the initial sale of the token and the allocation of rights associated with it.
ALGO title holders might be viewed as obtaining an investment contract, so na-tional prosecutors might pursue an ALGO claim case.
The ALGO case can be viewed as a fundamental building block of Algorand’s business, with a primary focus on cash flow.
Expectations of profit solely from Algorand’s efforts can be scrutinized. ALGO might be considered a security
So transactions on the ALGO blockchain would be subject to trade compliance and reserves legislative- block US institutional ALGO trade compliance loophole.
Precise Algorand regulations would be extremely advantageous concerning DeFi partnership weight fin-implemented financial focus regulations business partnership.
| Feature | Description |
|---|---|
| Blockchain Type | Pure Proof-of-Stake blockchain |
| Transaction Speed | ~1,000 TPS, finality in ~5 seconds |
| Consensus Mechanism | Pure Proof-of-Stake |
| Use Cases | DeFi, enterprise applications, NFTs |
| Token Utility | Staking, governance, transaction fees |
| Regulatory Concern | ICO and investor expectations may classify ALGO as a security |
| Network Strength | Scalable, low-cost, energy-efficient blockchain |
6. Axie Infinity (AXS)
Axie Infinity is one of the first blockchain-based gaming ecosystems that uses NFTs and the play-to-earn model. The game’s AXS tokens facilitate governance and staking and are used to reward players.
There are potential regulatory concerns as to whether AXS is a security due to sales of the tokens and the expectations of profits from the development team. The SEC is concerned whether AXS buyers are legal holders of the tokens as AXS permits governance and staking.
Whether AXS is a security will determine the level of compliance, investor protections, and security listing.
As the first case of blockchain gaming incorporating NFTs and gaming tokens, Axie Infinity will define the gaming sector’s regulatory approach and its blockchain gaming adoption as a whole.
| Feature | Description |
|---|---|
| Blockchain Type | Ethereum-based gaming ecosystem |
| Transaction Speed | Ethereum layer-2 dependent |
| Consensus Mechanism | Proof-of-Stake via Ronin sidechain |
| Use Cases | Play-to-earn gaming, NFTs, governance |
| Token Utility | Staking, governance, in-game rewards |
| Regulatory Concern | Token sales and profit expectations may classify AXS as a security |
| Network Strength | Pioneer in blockchain gaming and NFT ecosystems |
7. Sandbox (SAND)
The Sandbox is a metaverse platform where users create, own, and profit from digital experiences and NFTs.
The platform’s native token, SAND, is used for governance, in-game purchases, and staking. There are security concerns regarding the initial token sale and whether buyers made profits due to Sandbox’s ongoing development.
If SAND is a security, regulations will affect the trading of SAND on exchanges and inhibit liquidity and institutional adoption.
This classification may stall partnerships with brands, NFT creators, and investors. Legal clarity would enhance Sandbox’s position as a decentralized gaming and metaverse ecosystem and reduce possible regulatory risks.
| Feature | Description |
|---|---|
| Blockchain Type | Ethereum-based metaverse platform |
| Transaction Speed | Ethereum layer-2 dependent |
| Consensus Mechanism | Ethereum Proof-of-Stake |
| Use Cases | Metaverse creation, NFTs, gaming, social experiences |
| Token Utility | Governance, staking, in-game transactions |
| Regulatory Concern | Token sale structure may imply SAND as a security |
| Network Strength | Strong partnerships with gaming and entertainment brands |
8. Chiliz (CHZ)
Chiliz is a blockchain platform that allows fans to participate in governance and obtain limited experiences in sports and entertainment.
Fans are able to purchase ‘fan tokens’ and participate in the Chiliz ecosystem through CHZ tokens. Once acquired, fans are able to engage in governance and vote on the allocation of funds.
CHZ may be classified as a security and therefore may fall under SEC scrutiny due to profitability expectations that investors may have.
This possible classification will impact CHZ’s marketing, exchange listings, and institutional investment.
Regulatory clarity will ensure that Chiliz maintains sports franchises and global adoption without investor disputes or penalties.
| Feature | Description |
|---|---|
| Blockchain Type | Fan token platform |
| Transaction Speed | ~30 TPS (depends on network layer) |
| Consensus Mechanism | Proof-of-Authority hybrid |
| Use Cases | Sports fan engagement, governance, NFTs |
| Token Utility | Purchase fan tokens, participate in voting |
| Regulatory Concern | Profit expectation from team efforts may trigger security classification |
| Network Strength | Partnerships with major sports clubs globally |
9. Flow (FLOW)
Flow is a blockchain specifically designed for NFTs, games, and digital collectibles, enabling users to obtain these products without the system becoming overly centralized.
FLOW tokens are used to pay network fees, stake, and govern the network. The platform poses regulatory concerns due to its initial sales and distribution methods, as many investors expected returns from the team’s efforts.
Such returns would risk classifying FLOW as a security, impacting trading and institutional investment.
The ambiguous and complex regulatory environment will be the largest constraint on the growth of FLOW in the NFTs, gaming, and digital art market. This environment will be a risk for creators, investors, and enterprises alongside the ecosystem.
| Feature | Description |
|---|---|
| Blockchain Type | Scalable blockchain for NFTs and games |
| Transaction Speed | ~1,000 TPS |
| Consensus Mechanism | Multi-role architecture + Proof-of-Stake |
| Use Cases | NFTs, gaming, collectibles, dApps |
| Token Utility | Staking, network fees, governance |
| Regulatory Concern | Initial distribution and investor expectations may classify FLOW as a security |
| Network Strength | Designed for large-scale NFT adoption and gaming |
10. Near Protocol (NEAR)
Near Protocol is a proof-of-stake blockchain designed for dApps and dApp-focused DeFi solutions. NEAR tokens are used for staking, governance, and paying network fees.
Concerns regarding NEAR being a security mostly come from the viewpoints of profit expectations.
Regarding the classification of NEAR as a security, it would entail the trading of NEAR on exchanges and NEAR fundraisings to be compliant with the NEAR Protocol.
This would limit the confidence nearness would have and the growth of the ecosystem. It would be better for NEAR to have clear on-chain legal regulations than off-chain legal operational uncertainty.
| Feature | Description |
|---|---|
| Blockchain Type | Sharded, proof-of-stake blockchain |
| Transaction Speed | ~100,000 TPS (sharded network) |
| Consensus Mechanism | Nightshade Proof-of-Stake |
| Use Cases | DeFi, dApps, NFTs, enterprise apps |
| Token Utility | Staking, governance, network fees |
| Regulatory Concern | ICO and profit expectation may imply security classification |
| Network Strength | Highly scalable with developer-friendly tools |
Conclsuion
To wrap up, identifying Solana, Cardano, and Polygon and a few other cryptocurrencies as securities reflects growing regulatory attention within the crypto sector.
The implications of such a classification necessitate compliance from exchanges, investors, and the project teams.
To facilitate the continued growth of blockchain technology, the legal and financial landscapes of the world will need to be adapted to protect investors
While also allowing for innovation. Appropriate regulations will be key to achieving this harmony.
FAQ
It means the token may be regulated under securities laws, subjecting it to compliance, reporting, and trading restrictions.
Examples include Solana (SOL), Cardano (ADA), Polygon (MATIC), Filecoin (FIL), Algorand (ALGO), Axie Infinity (AXS), Sandbox (SAND), Chiliz (CHZ), Flow (FLOW), and Near Protocol (NEAR).
Primarily because investors expect profits from the efforts of the development team or project, meeting the “investment contract” criteria.
Exchanges may need registration as securities platforms and adhere to stricter compliance regulations.
Yes, both retail and institutional investors may face restrictions or reporting requirements.
