The recent lawsuit between the US Securities and Exchange Commission (SEC) and Binance has taken an intriguing turn, as the SEC filed a notice of supplemental authority citing the judgment in SEC v. Terraform Labs as a significant precedent.
The SEC’s strategic move aims to leverage the Terra ruling in its case against Binance, Binance.US, and former CEO Changpeng ‘CZ’ Zhao.
However, legal expert Bill Morgan, known for his pro-crypto stance, argues that the Terraform Labs decision may not be directly relevant to the SEC’s case against Binance and Coinbase.
Terra Ruling In Binance And Coinbase Lawsuits
Dave Weisberger, co-CEO of CoinRoutes, commented on the Terra case, highlighting that its key focus was on the marketing of UST, LUNA, and yield through Anchor Protocol by Do Kwon, co-founder and former CEO of Terraform Labs.
Weisberger emphasized that the case revolved around defining an investment contract rather than the tokens themselves. This perspective is crucial to understanding the SEC’s argument and potential impact.
Bill Morgan agrees with Weisberger’s assessment, stating that the Terraform Labs case’s application of the Howey test may be as singular and standalone as the Torres decision on Ripple’s sale of XRP.
Morgan suggests that the Terra ruling may have limited relevance and persuasive value in the context of the Coinbase and Binance lawsuits.
Morgan emphasizes that legal cases often turn on their specific facts, particularly when key legal issues are sensitive to specific circumstances. Morgan notes that it will be interesting to see which case becomes more persuasive in future similar cases.
SEC’s Reliance On Terra Case
As reported by Bitcoinist, the SEC’s argument centers around the Terra case’s interpretation of the “investment contract” definition within cryptocurrency offerings.
The SEC contends that the Howey Test’s application by the court to classify UST, LUNA, wLUNA, and MIR as investment contracts and securities is directly relevant to the products and services offered by Binance.
This includes BUSD (Binance USD), the staking service BNB Vault, and the Simple Earn program. The SEC emphasizes that the Terra ruling should influence the court’s decision on Binance’s dismissal motion, highlighting the relevance to defendants BAM Trading Inc. and BAM Management US Holdings Inc.
In contrast to the SEC’s position, Bill Morgan’s analysis challenges the notion that the Terra ruling directly applies to the SEC’s case against Binance and Coinbase.
Morgan argues against the SEC’s attempt to extend the ruling’s reach to digital assets and services offered by the exchanges, maintaining that the tokens and services fall outside the purview of securities law.
Morgan’s perspective questions the SEC’s approach and highlights the need to carefully examine the specific facts and legal issues involved in each case.
As the legal proceedings between the SEC and two of the most important crypto exchanges in the world unfold, the court will need to carefully consider the facts and legal arguments presented by both sides to determine the applicability and persuasive value of the Terra ruling.
Featured image from Shutterstock, chart from TradingView.com