Solana Labs faces a class-action lawsuit from investors for being a highly centralized token which is far from what they claim. The project team has always used the word “decentralized” to talk about themselves, despite the fact that nearly 50% of the coin’s supply is with the developers. Therefore, investor Mark Young alleged that SOL doesn’t fit the definition of decentralized and is, in fact, highly concentrated security.
The lawsuit
Solana has faced yet another trouble. All this while, its network has been going down, but this time, it’s a court matter. This is surely going to leave a dent in SOL’s price in this bear market. While the class action lawsuit is primarily on the decentralization aspect of the token, it is also seemingly unregistered security. We can use the Howey test to determine the same. Let’s see what that is all about. To be termed security, we need to ask three main questions.
- Is there money involved if someone wants to acquire SOL securities?
- Is the money flowing into an enterprise or a company?
- Will the returns on investment be dependent on the enterprise or its team to create what they promised?
The answers to all these questions are yes, which makes SOLANA a security. This is not a declaration; however, they will be grilled a lot in court regarding the matter.
Solana’s price action
Solana made an all-time high of nearly $250 and has been on the decline since then. It is currently trading near $38 with a market cap of $13.2 billion and has been unable to see any major pump. Since Solana’s network has been struggling to stay up all the time, the price action has also been bad.
There is also the problem that Solana needs additional hardware to increase network bandwidth. Even after using the proof of stake consensus, this is a roadblock. The token has faced a lot of backlash with all the issues going on.
Solana was a very promising project for 2021 with all hype about transaction speeds and low costs. However, after the first rally to an ATH, it hasn’t seen a major rebound. What are your thoughts as Solana Labs faces a lawsuit from investors? And are you invested in the token? Let us know in the comments below. Also, if you found our content informative, do like and share it with your friends.
Also Read: Three Arrows Capital files for bankruptcy after court orders liquidation.
