The ongoing legal battle between the US Securities and Exchange Commission (SEC) and major crypto exchanges Binance and Coinbase has taken an intriguing turn as the SEC filed a notice of the supplemental authority, citing the judgment in SEC v. Terraform Labs as a significant precedent. However, legal experts, including prominent figure Bill Morgan, have raised questions about the direct relevance and applicability of the Terra ruling to the SEC’s cases against Binance and Coinbase.
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The SEC’s strategic move to leverage the Terra ruling
The SEC’s strategic move to leverage the Terra ruling in its case against Binance, Binance.US, and former CEO Changpeng ‘CZ’ Zhao aims to influence the court’s interpretation of the “investment contract” definition within cryptocurrency offerings. The SEC argues that the Terra case’s application of the Howey Test to classify tokens such as UST, LUNA, wLUNA, and MIR as investment contracts and securities should directly impact the judgment on Binance’s dismissal motion.
However, legal expert Bill Morgan, known for his pro-crypto stance, asserts that the Terraform Labs decision might not be directly relevant to the SEC’s cases against Binance and Coinbase. Morgan agrees with the analysis from CoinRoutes’ co-CEO, Dave Weisberger, who emphasizes that the Terra case primarily focused on defining an investment contract rather than the nature of the tokens themselves.
The KEY in the terra case is the MARKETING of UST, LUNA & yield thru Anchor Protocol by Do Kwon who guaranteed returns & told people HE (through his efforts) would insure success.
In other words the DEFINITION of an investment contract.
It has NOTHING to do with the…
— Dave Weisberger (@daveweisberger1) January 7, 2024
Morgan suggests that the Terra ruling’s application of the Howey test may be unique, similar to the Torres decision in the Ripple-XRP case. He argues that such rulings might have limited relevance and persuasive value in the broader context of the SEC’s lawsuits against major exchanges.
Morgan’s analysis challenges the SEC’s attempt to extend the Terra ruling’s reach to digital assets and services offered by Binance and Coinbase. He maintains that the tokens and services these exchanges provide fall outside the securities law’s purview.
As the legal proceedings unfold, the court will play a crucial role in carefully considering the facts and legal arguments presented by both the SEC and the crypto exchanges. The applicability and persuasive value of the Terra ruling in these cases remain contentious, and the outcome will likely set important precedents for future regulatory actions in the crypto space.