Polygon has responded to the U.S. Securities and Exchange Commission’s (SEC) claim that its token is a security governed by the Securities laws. According to a June 11, 2023 tweet, Polygon has advised that its token was developed and deployed outside the United States (U.S.) and never targeted the U.S. market at any time.

In its recent cases against Binance and Coinbase, the SEC named the following cryptocurrencies as securities: BNB, Binance USD, Solana, Cardano, Polygon, ATOM, SAND, MANA, AXS, COTI, Chiliz (CHZ), FLOW, Internet Computer (ICP), NEAR, Voyager Token (VGX), and NEXO.

The SEC Chair, Gary Gensler, has reiterated his earlier position on crypto tokens. According to Gensler, many problems in the crypto markets arise from wide-ranging non-compliance, as witnessed before the federal securities laws were put in place in the 1920s.

Gensler made the remarks before the Piper Sandler Global Exchange & Fintech Conference in Washington, D.C., on June 8, 2023. He further said that most crypto tokens meet the investment contract test, and crypto security issuers must register the offer and sale of their investment contracts with the SEC or seek an exemption.

Gensler further referenced the guidance the SEC has provided market participants on what does or does not constitute a crypto asset security. Gensler pointed out that intermediaries and promoters offer lending or staking-as-a-service programs that promise returns in exchange for investors’ crypto tokens.

However, Gensler says that additional utility does not remove crypto asset security from an investment contract, even when promoters say tokens have functions beyond an investment vehicle.

Gensler said that most crypto tokens are subject to securities laws and that it is immaterial whether the enterprise is speculative or non-speculative or whether there is a sale of property with or without intrinsic value.

In its complaint last week, the SEC alleged that Binance attempted to evade U.S. securities laws to keep high-value U.S. customers on their platforms. Gensler advised crypto intermediaries to separate business lines and properly segregate customer funds to protect investors.

It remains to be seen what next steps the SEC will take against those crypto tokens it has deemed as securities.

However, some of the crypto tokens in question are experiencing high volatility.