- Lido and Rocket Pool’s stake tokens were labeled as securities by the SEC
- The price of LDO plummeted on the charts, while the price of RPL remained relatively stable
The American SEC (Securities and Exchanges Committee) is in the news again for all kinds of unpleasant reasons. This time it is for labeling Lido, for example [LDO] and Rocket Pool [RPL] as effects.
SEC strikes again
The SEC considers Lido and Rocket Pool’s staking programs to be securities because they function similarly to investment contracts. Investors contribute their ETH to a shared pool, expecting to make a profit based on the efforts of the program’s managers, rather than their own actions.
Classifying the Lido and Rocket Pool staking programs as securities by the SEC could have several negative consequences. Registering and complying with securities regulations can be expensive and time-consuming. Lido and Rocket Pool may face significant hurdles in meeting these requirements.
The lawsuit has sparked fear in the market, potentially leading to a decline in user participation and a drop in the value of their tokens (stETH & rETH).
In fact, data from Santiment showed that network growth associated with both stETH and rETH has fallen significantly in recent weeks. This suggested that the number of new addresses interested in both staking tokens dropped significantly.
If new users continue to lose interest in them, both protocols could suffer.
Source: Santiment
In addition, acting as a security measure may limit Lido and Rocket Pool’s ability to freely offer their services. They may face restrictions on who they can offer their services to or how they structure their programs.
Deja Vu
The SEC’s lawsuit against Ripple Labs provides valuable insight into the potential consequences Lido and Rocket Pool could face. In that case, the lawsuit caused a significant drop in the price of XRP as exchanges delisted it due to uncertainty over its legal status. In fact, LDO and RPL have already registered price declines following the SEC’s announcement. And a further decline is not exactly ruled out.
At the time of writing, LDO is down 18.17% in the past 24 hours. The RPL, on the other hand, fell by 1.08%.
Realistic or not, here is the market cap of LDO in terms of BTC
However, it is also important to see that the SEC’s core argument in the Ripple case was that XRP itself was a security sold through an unregistered offering.
The case of Lido and Rocket Pool is slightly different. The SEC views their staking programs as investment contracts, not the tokens themselves, which could spell bad news for stETH and rETH. The impact on LDO and RPL will therefore remain largely uncertain for some time.