Tokens In SEC's CrossHairs Are Posting Double Digit Year-To-Date Returns

The Securities and Exchange Commission is doubling down on its allegations that certain crypto assets are securities. These allegations haven't dampened investor enthusiasm for most of the tokens.

AccessTimeIconNov 21, 2023 at 6:27 a.m. UTC
Updated Jan 26, 2024 at 2:53 p.m. UTC
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  • In its suit against Kraken, the SEC has doubled down on allegations that a number of high-profile tokens are securities
  • Many of these tokens have posted double-digit gains year-to-date as traders shake off regulatory uncertainty.

Cryptocurrency exchange Kraken is once again in the crosshairs of the Securities and Exchange Commission (SEC). As part of this suit, the Commission is alleging that the exchange dealt in what they consider securities without proper registration, reiterating its belief that top tokens like Solana's SOL and Cardano's ADA are securities.

"Kraken currently makes available for trading crypto assets that have been the subject of prior SEC enforcement actions based upon their status as crypto asset securities," the suit reads.

Although many would think that being named by the SEC in enforcement actions time and time again would be a sort of scarlet letter for tokens and would lead to depressed prices, market data shows that's not the case.

Perhaps a lesson to take away from this is that traders value technical capability over regulatory compliance – or they understand that the SEC is not the only regulator on the planet.

Tokens named as securities in SEC enforcement action (CryptoRank.io)
Tokens named as securities in SEC enforcement action (CryptoRank.io)

According to on-chain data, many named tokens have outperformed bitcoin as part of a broader market rally. The 'basket' of these tokens is up an average of 41%.

Solana's SOL is up nearly 463% year-to-date. In June, when the SEC first accused SOL of being an unregistered security, the Solana Foundation quickly hit back to deny the accusations, and, as CoinDesk reported at the time, the developer community was largely indifferent.

While there isn't a specific catalyst to build hype around SOL, the market appears to be very receptive to things like positive comments from ARK Invest CEO Cathie Wood that "Solana is even faster and cost-effective than Ether" and Grayscale's Solana Trust (GSOL) having a 900% premium over spot prices – indicative of institutional demand for the token.

Meanwhile, Cardano's ADA is up over 50% as Cardano's blockchain transactions increased by 49% in Q2 due to network upgrades and new user attraction, despite a drop in active daily users, with notable growth in data load and developer interest.

Over the last few months, the NEAR Foundation's NEAR token has also seen a series of positive headlines, likely increasing investor interest to counterbalance the SEC's allegations. As CoinDesk recently reported, NEAR rallied following its partnership announcement with Nym Technologies, aimed at integrating Nym's privacy infrastructure into the Near ecosystem to enhance user privacy for NFTs, DeFi, and dApps.

However, not all of these named tokens are squarely in the green. Market data shows that some tokens like Cosmos' ATOM are in the red, with ATOM down 4% year-to-date.

The Cosmos blockchain, once a pioneer in interoperability and decentralized applications, faced this year an existential crisis due to Terra's collapse, rising competition from Ethereum, as well as internal community challenges, CoinDesk reported in July, and this dampened enthusiasm for the protocol is likely reflected in ATOM's price.

Edited by Omkar Godbole.

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