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On Wednesday, the future of Solana may have been clouded by United States Southern District of New York’s Judge Katherine Polk Failla with her <a href="https://bitcoinist.com/breaking-coinbase-sec-case-reaches-critical-point/" target="_blank" rel="noopener ">decision</a> against Coinbase’s motion to dismiss. The ruling enables the Securities and Exchange Commission (SEC) to advance its case against the crypto exchange giant. The case centers on allegations that Coinbase has been operating as an unregistered exchange, broker, and clearing agency, and its Staking Program constitutes the unregistered offer and sale of securities. 
<h2 id="solana-sol-is-a-security-judge-failla">Solana (SOL) Is A Security: Judge Failla</h2> 
The implications of this ruling extend far beyond Coinbase, striking a chord, particularly with the Solana community. The judge’s mention of SOL (and Chilliz (CHZ)) in the context of the lawsuit highlights the SEC’s position that both crypto assets are securities. Notably, the agency only has to prove that at least one of the 13 named tokens is a security, and Judge Failla specifically chose SOL (and CHZ) as an example to agree with the SEC’s arguments. 
Bill Morgan, a pro-XRP lawyer, offered a detailed <a href="https://twitter.com/Belisarius2020/status/1772996762703388825" target="_blank" rel="noopener nofollow">commentary</a> on the ruling via X (formerly known as Twitter), drawing attention to the critical examination of SOL. Morgan stated, “One of these was Solana. She found that the SEC plausibly asserts that Coinbase facilitated transactions in crypto-asset ‘securities’. She clearly found that the SEC had plausibly argued sales of SOL were securities and did not accept sales on secondary markets were not securities.” 
This observation underscores the <a href="https://bitcoinist.com/ripple-clo-coinbase-vs-sec-is-far-from-over/" target="_blank" rel="noopener ">heightened regulatory scrutiny</a> and potential reclassification risks facing Solana and similar tokens. Morgan added, “It is a setback for Coinbase and does not look good for SOL sales not being found to be investment contracts. Seriously, if Coinbase was consistent in its reaction to the filing of the SEC v Ripple case in delisting XRP it would now delist SOL.” 
In her <a href="https://twitter.com/CardanoSpot/status/1773071584263057809" target="_blank" rel="noopener nofollow">ruling</a>, Judge Failla detailed SOL’s operational history and its efforts to raise capital, thus framing the context for its potential classification as a security. “SOL” is described as a crypto-asset that is the native token of the Solana blockchain, a network designed to support decentralized applications (dApps) and characterized by its high transaction speeds and scalability. 
The judge noted, “To raise capital, Solana Labs conducted a series of initial offerings of SOL to institutional investors. Between May 2018 and early March 2020, initial investors were provided with “sale and issuances rights to receive [SOL] tokens in the future via a Simple Agreement for Future Tokens (SAFTs). Through these offers and sales, Solana sold approximately 177 million SOL, raising over $23 million. Later in March 2020, Solana Labs conducted additional SOL sales on the CoinList trading platform in a “Dutch auction.” 
This assessment not only underscores the magnitude of Solana’s fundraising efforts but also aligns with the criteria of an investment contract under the Howey Test—a benchmark for determining whether a transaction qualifies as a security. If SOL is adjudged to meet these criteria, the implications for SOL could be profound. 
The classification of SOL as a security could introduce significant regulatory burdens and reshape its market dynamics. 
Just last week, Anatoly Yakovenko, co-founder of Solana Labs, expressed his support for Ethereum amid escalating regulatory scrutiny. His statement, shared via X, came after it became known that the SEC is scrutinizing the Ethereum Foundation for a potential classification as a security. “If the state is against ethereum then I am against the state,” he stated. 
<blockquote class="twitter-tweet" data-width="500" data-dnt="true"> 
 If the state is against ethereum then I am against the state 
 — toly <img src="https://s.w.org/images/core/emoji/14.0.0/72x72/1f1fa-1f1f8.png" alt="🇺🇸" class="wp-smiley" style="height: 1em; max-height: 1em;"> (@aeyakovenko) <a href="https://twitter.com/aeyakovenko/status/1770622972937839081?ref_src=twsrc%5Etfw" rel="nofollow noopener" target="_blank">March 21, 2024</a>
</blockquote> 
It is also important to note that the SEC called Solana a security also in the <a href="https://bitcoinist.com/sec-sues-binance-and-ceo-for-securities-fraud/" target="_blank" rel="noopener ">Binance lawsuit</a>, alongside other altcoins like Polygon, Cardano, Filecoin, Cosmos Hub, and gaming-centered projects such as The Sandbox, Decentraland, and Axie Infinity in June 2023. To date, the US agency hasn’t taken any action against Solana Labs. 
Market response to the ruling was swift, with Solana’s price witnessing a 5.7% drop, although it managed to recover most of its losses today. At press time, SOL traded at $185. 
<img loading="lazy" decoding="async" class="size-full wp-image-290169" src="https://bitcoinist.com/wp-content/uploads/2024/03/SOLUSD_2024-03-28_11-27-37.png?resize=1024%2C472" alt="Solana price" width="1024" height="472" srcset="https://bitcoinist.com/wp-content/uploads/2024/03/SOLUSD_2024-03-28_11-27-37.png?resize=1024%2C472?w=3628 3628w, https://bitcoinist.com/wp-content/uploads/2024/03/SOLUSD_2024-03-28_11-27-37.png?resize=1024%2C472?w=640 640w, https://bitcoinist.com/wp-content/uploads/2024/03/SOLUSD_2024-03-28_11-27-37.png?resize=1024%2C472?w=768 768w, https://bitcoinist.com/wp-content/uploads/2024/03/SOLUSD_2024-03-28_11-27-37.png?resize=1024%2C472?w=980 980w, https://bitcoinist.com/wp-content/uploads/2024/03/SOLUSD_2024-03-28_11-27-37.png?resize=1024%2C472?w=1536 1536w, https://bitcoinist.com/wp-content/uploads/2024/03/SOLUSD_2024-03-28_11-27-37.png?resize=1024%2C472?w=2048 2048w, https://bitcoinist.com/wp-content/uploads/2024/03/SOLUSD_2024-03-28_11-27-37.png?resize=1024%2C472?w=750 750w, https://bitcoinist.com/wp-content/uploads/2024/03/SOLUSD_2024-03-28_11-27-37.png?resize=1024%2C472?w=1140 1140w, https://bitcoinist.com/wp-content/uploads/2024/03/SOLUSD_2024-03-28_11-27-37.png?resize=1024%2C472?w=3000 3000w" sizes="(max-width: 1000px) 100vw, 1000px" data-recalc-dims="1">

Solana’s Future Clouded By Coinbase-SEC Ruling, Says Crypto Lawyer

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