• The SEC has initiated legal proceedings against two prominent cryptocurrency exchanges, Coinbase and Binance.
• Several coins have been identified as securities by the SEC, including SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH , NEXO , ATOM , ALGO and COTI.
• The foundation of the SEC’s legal action centers around the Howey Test which determines if an investment is a “security” based on four essential elements.

SEC Files Lawsuit Against Coinbase and Binance

The Securities and Exchange Commission (SEC) is taking decisive action against two prominent cryptocurrency exchanges: Coinbase and Binance. The regulatory body in the United States has initiated legal proceedings against these companies for not obtaining licenses to facilitate trading in securities. Both exchanges are now facing potential fines and even imprisonment as a result of this lawsuit.

Which Coins Are Classified As Securities?

The SEC explicitly identifies several coins that it considers to be securities according to the Securities Act of 1943. These include SOL, ADA, MATIC, FIL, SAND; AXS; CHZ; FLOW; ICP; NEAR; VGX; DASH; NEXO ; ATOM ALGO ; COTI . None of these cryptocurrencies are Proof-of-Work (PoW) coins but instead utilize alternative consensus mechanisms such as Proof-of-Stake (PoS). This aligns with the SEC’s approach because it classifies both Coinbase and Binance as unauthorized securities services due to their staking-as-a-service offerings.

The Howey Test

The foundation of the SEC’s legal action centers around the Howey Test – an established legal framework dating back to 1946 named after the pivotal case of SEC vs WJ Howey Co.. This test determines whether an investment is classified as a ‘security’ or not based on four essential elements: an investment of money involved in a common enterprise with anticipation of profits primarily from others efforts. According to the SEC all 19 tokens traded on Binance and Coinbase satisfy this criteria which means they all could potentially be removed from circulation unless appropriate licenses are obtained by said exchanges soon.

Coinbase & Binance Response

Coinbase has not yet taken any actions regarding this lawsuit whereas Binance has already delisted some trading pairs from its platform due to this issue. It will be interesting to see how both companies respond going forward in order to ensure compliance with US regulations going forward.


It remains unclear what consequences await both Coinbase and Binance for failing to obtain appropriate licenses for trading securities but one thing is certain – greater regulation is coming for cryptocurrency markets across many countries worldwide which could significantly affect current prices if stricter regulations come into play soon enough.

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