July 14, 2024

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Lido, Rocket Pool, and What the Latest SEC Betting Lawsuit Means

Lido, Rocket Pool, and What the Latest SEC Betting Lawsuit Means
  • Lido and Rocket Pool tokens are classified as securities by the Securities and Exchange Commission
  • LDO price is down on the charts, while RPL price remains relatively stable.

The US Securities and Exchange Commission (SEC) is in the news again for all sorts of compelling reasons. This time, to classify the likes of Lido [LDO] And the pool of missiles [RPL] Like securities.

The SEC Strikes Again

The SEC considers Lido and Rocket Pool’s staking programs to be securities because they operate similarly to investment contracts. Investors contribute their ETH to a shared pool, with the expectation of making profits based on the efforts of the program’s administrators, not their own actions.

The SEC’s classification of Lido and Rocket Pool’s staking programs as securities could have several negative consequences. Registration and compliance 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, which could lead to lower user engagement and a drop in the value of their tokens (stETH & rETH).

In fact, data from Santiment revealed that network growth associated with both stETH and rETH has declined meaningfully over the past few weeks. This indicates that the number of new addresses interested in both symbols has decreased significantly.

If new users continue to lose interest, both protocols may suffer.

Source: Santiment

In addition, acting as collateral may restrict Lido and Rocket Pool’s ability to freely provide their services. They may face restrictions on who they can provide their services to or how to structure their programs.

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deja vu

The SEC’s lawsuit against Ripple Labs provides valuable insights into the potential consequences that Lido and Rocket Pool may face. In this case, the lawsuit led to 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 seen price drops following the SEC’s announcement. Further declines are not out of the question.

At the time of writing, LDO stock is down 18.17% in the last 24 hours. On the other hand, RPL stock is down 1.08%.

Whether it’s realistic or not, this is the market cap of LDO in terms of BTC.

However, it is also important to see that the SEC’s primary 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 a little different. The SEC views its staking programs as investment contracts, not the tokens themselves, which could mean bad news for stETH and rETH. Therefore, the impact on LDO and RPL will remain highly uncertain for some time.