Crypto platform Bakkt delists Solana, Polygon, and Cardano, citing lack of regulatory clarity

Just over two months after completing a $155 million acquisition for the trading infrastructure provider Apex Crypto, the New York-based digital assets platform Bakkt is delisting three of the largest cryptocurrencies by market cap: Solana, Polygon, and Cardano.

Bakkt general counsel and secretary Marc D’Annunzio told Fortune in a statement the company was taking proactive action “until there is further clarity on how to compliantly offer a more extensive list of coins.”

The decision comes a week after the U.S. Securities and Exchange Commission filed lawsuits against crypto exchanges Binance and Coinbase, alleging that both platforms were offering unregistered securities to customers. In the complaints, the SEC alleged for the first time that Solana’s SOL, Polygon’s MATIC, and Cardano’s SOL are securities.

The SEC’s expanded definition has spurred crypto platforms to revisit which tokens they list. Robinhood’s chief legal compliance officer told Congress the day of the Coinbase lawsuit that the trading app was actively reviewing its offerings. Robinhood delisted SOL, ADA, and MATIC three days later.

Bakkt is now following suit. The publicly listed company—initially launched by Intercontinental Exchange, operator of the New York Stock Exchange, in 2018—has taken a compliance-first approach. After cycling through different business models, it now focuses on a turnkey service that helps other fintech platforms, such as Webull and Public.com, set up crypto trading. 

After offering only Bitcoin and Ethereum, Bakkt’s acquisition of Apex Crypto allowed it to expand the cryptocurrencies available to its customers. Wary of regulators, Bakkt began to reduce the list of tokens that would come over from Apex. During the due diligence process, Bakkt had Apex Crypto delist seven tokens, including the failed Terra and the privacy coin ZCash.

After the acquisition was completed in early April, Bakkt delisted an additional two tokens—Algorand and Decentraland’s MANA—the day after they were named as securities in an SEC lawsuit against Bittrex. Then in May, Bakkt delisted 25 of its remaining 36 tokens, with a spokesperson attributing the decision to its “regulator coin listing review process” and the “most up-to-date regulatory guidance.”

The latest delisting reflects the increasingly hostile crypto environment in the U.S., as firms try to navigate an evolving regulatory landscape shaped by the aggressive SEC. Bakkt still offers eight other cryptocurrencies, including Dogecoin, Litecoin, USDC, and Shiba Inu, along with Bitcoin and Ether.

“It’s fine to tell me where I can’t stand,” Gavin Michael, Bakkt’s CEO, told Fortune in an interview. “But you have to tell me how to operate.”

What’s in a security?

The question of whether cryptocurrencies should be regulated as securities or commodities has become central to the industry in the U.S., with the SEC butting heads with operators on if—and how—firms should register with the agency.

In its recent spate of enforcement actions, the SEC has targeted platforms for selling tokens that the agency deems unregistered securities, with Chair Gary Gensler arguing the vast majority of cryptocurrencies, with the exception of Bitcoin, are securities. Crypto firms, in response, say that there is no viable path for registering securities or platforms with the SEC.  

Whenever the SEC describes a new token as a security in a lawsuit, it causes a ripple effect across the U.S. crypto ecosystem—a phenomenon that many industry participants describe as “regulation by enforcement.” Michael said that one of the reasons that Bakkt decided to delist MANA and ALGO following the Bittrex lawsuit is that liquidity providers stopped supporting the two tokens, meaning Bakkt could no longer offer a competitive depth of market.

Despite the threat of SEC action, Bakkt chief product officer Dan O’Prey said that a committee weighs myriad factors in a monthly process when deciding whether to continue listing tokens. Considerations include whether the token is a privacy coin, whether it is used for money laundering, and whether there have been hacks or other security issues. Other determinants include a token’s liquidity and trading volume levels, as well as the likelihood it will be alleged to be a security by the SEC. For the latter, Bakkt applies legal standards like the Howey Test, along with looking at whether similar tokens have been named as a security.

Bakkt’s proactive decision in May to delist 25 tokens proved to be prescient, with one—Filecoin—later included as a security in the SEC’s lawsuit against Binance.  

“That was a big piece of why we did the 25, because we didn’t want to have to be constantly reacting,” O’Prey said, adding that Bakkt had “never [been] under the illusion that it would be a perfect number.”

He said that some of Bakkt’s partners are changing their preferences, including only listing Bitcoin and Ether, while others are unimpacted by SEC actions. The company plans to expand its custody offerings to include other cryptocurrencies beyond Bitcoin and Ether.

CEO Gavin Michael said that Bakkt will continue to work with regulators on compliance but understands that further challenges are likely.  

“Given everything we’ve been through over the last year and a half, it takes a lot to get surprised these days,” he told Fortune.