July 20, 2023
In three complaints against the US’s most prominent digital asset trading platforms, Binance, Coinbase, and Bittrex, the US Securities and Exchange Commission (the “SEC”) alleged that 23 unique digital assets are securities, consisting of SOL, ADA, MATIC, FIL, ATOM, SAND, MANA, ALGO, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH, NEXO, COTI, BNB, BUSD, OMG, TKN, NGC, and IHT (together, the “23 Complaint Tokens”). This flurry of enforcement actions against the most prominent digital asset exchanges available in the US signals the SEC’s shift toward targeting key intermediaries and away from its previous strategy of bringing individual actions against specific fungible tokens, which presented a challenge to the SEC’s limited capacity given the 22,932 fungible tokens in existence as of March 2023.
In this legal update, we build on our previous analysis of the nine digital assets the SEC declared to be securities in SEC v. Ishan Wahi, Nikhil Wahi, and Sameer Ramani and analyze 22 of the 23 Complaint Tokens to identify key characteristics that the SEC cites when arguing these digital assets are securities. In addition, at the end of this article, we provide regulatory risk mitigation strategies that digital asset projects can consider based on insights gained from the Exchange Complaints.