Following the explosion caused by the U.S. Securities and Exchange Commission (SEC) lawsuits against the Binance and Coinbase exchanges, several cryptocurrency companies have disseminated messages to defend themselves against the accusations made by the regulator in its arguments.
Among these companies is Polygon Labs, which argues that its platform was “developed outside the U.S., implemented outside the U.S. and focused to this day on the global community that supports the network.”
According to a Polygon Labs release, “MATIC was a necessary part of the Polygon technology from day 1 (…) Given our focus on network security, we made sure MATIC was available to a broad group of people, but only with actions that did not target the U.S. at any point.”
The financial regulator sued Binance and Coinbase for violating federal laws, arguing that these companies made profits from the promotion and sale of securities.
According to the SEC, at least 12 cryptocurrencies that were traded on those platforms qualify as securities, based on the Howey test.
In response, Polygon insists that its activities were not focused on the U.S. market:
“The market outside the U.S. is the largest in the world, and we are grateful for all the thoughtful work being done on all aspects of this technology around the world, including by regulators and policymakers.”
However, the SEC’s complaint elaborates on why Polygon was included in this category along with 11 other cryptocurrencies:
“Polygon has also routinely announced when cryptoasset trading platforms have made MATIC available for trading, such as the Binance.US platform in June 2020.”
The SEC adds that Polygon, an Ethereum-compatible multi-chain network, repeatedly made posts about the company’s “growth and development” and that it “has explicitly encouraged MATIC buyers to view MATIC as an investment in other ways.”
The Howey test is used to define whether or not an asset is a security according to four characteristics: thus, if it is offered in exchange for money, if there are expectations of returns, if the investment is focused on a common enterprise and the returns depend on the efforts of a promoter or a third party, such an asset is categorized as a security.
Polygon is a network that has its own blockchain, which in some ways could serve as an argument that it is a commodity like Bitcoin, a cryptocurrency that does not fall under the SEC’s claim for its properties. But, in the SEC’s terms, the fact that Polygon made a pre-sale of its tokens allows MATIC to be categorized as a security.
Given these arguments, Brian Armstrog, CEO of Coinbase, said in an interview that there is no clarity in the regulation. “The assets that we do trade, those are commodities, so they don’t require those registrations […] we are trading crypto commodities on our exchange,” he said.
He further added: “We do not claim to be a broker or dealer, we have acquired a broker/dealer license which is still inactive because we are not allowed to activate it.”
Analysts believe that during the next months long litigation and profound changes in legislation are coming.
READ NEXT
Previous Articles:
- Turkish Citizens Seek Shelter in Tether Amid Collapsing Lira
- Terra Classic Embraces Upgraded Potential: Revitalizing the Blockchain Ecosystem with v2.1.0
- What Does Hopium Mean In Crypto?
- What Is The History Of Cryptocurrency?
- How Much Money Do You Need To Start In Crypto?
