U.S. SEC cites Terraform Labs precedent in lawsuit against Coinbase and Binance

SEC’s new claims
On the 4th, the U.S. Securities and Exchange Commission (SEC) submitted a supplementary notice of precedent regarding the lawsuit filed against Coinbase, a major U.S. cryptocurrency (virtual currency) exchange. They asked the court to consider the latest Terraform Labs case law. On the 3rd, the SEC submitted a similar supplementary precedent for the Binance case.
The SEC is referring to a December 28 case in which the U.S. District Court for the Southern District of New York upheld the SEC’s claim that Terraform Labs offered unregistered securities.
District Court Judge Jed Rakoff supported the SEC’s argument, saying, “There is no dispute that tokens such as UST, LUNA, wLUNA, and MIR are securities because they are investment contracts.”
The SEC is looking to use this ruling to its advantage to strengthen its case against two major cryptocurrency exchanges.
The SEC filed suit against Binance on June 5, 2023, and Coinbase on June 6, 2023, for allegedly offering securities without registration. They also raise questions about the securities nature of the staking services offered by both exchanges.
Link: U.S. District Court rules in favor of SEC in lawsuit against Terraform Labs
coinbase case
The SEC’s complaint against Coinbase does not mention UST, LUNA, wLUNA, or MIR tokens. The SEC asserts that the following securities should be classified as unregistered securities:
Solana (SOL), ADA (ADA), Polygon (MATIC), The Sandbox (SAND), Chilis (CHZ), Internet Computer (ICP), NEAR (NEAR), DASH (DASH), Filecoin (FIL) , Axie Infinity (AXS), FLOW, Voyager (VGX), NEXO
Coinbase argues that its tokens, which the SEC considers securities, are not investment contracts and that the SEC exceeded its authority in the lawsuit. Paul Grewal, Coinbase’s Chief Legal Officer, said:

The SEC attempts to overextend its authority by arguing that anything a buyer buys in the expectation of appreciation in value is an investment contract and therefore a security.

Regarding the definition of ‘investment contract’, securities law scholars from prestigious U.S. universities submitted an opinion to the court in support of Coinbase in August of last year. SEC v. Provides analysis and commentary on the understanding/definition of “investment contracts” under the Hawey Supreme Court decision and enactment of federal securities laws.
Link: Coinbase has refiled its counter-argument in its lawsuit against the SEC.
Connection: Prominent U.S. legal scholars filed an amicus brief supporting Coinbase against the SEC.

What is the Howie Test?
The Howie test is a test used in the United States to determine whether a particular transaction falls within one of the definitions of a securities transaction called an “investment contract.” The court used this as the standard for judging an ‘investment contract’ in a sub-litigation case in 1946. /blood>

Cryptocurrency Glossary

Binance Case
In its lawsuit against Binance, the SEC stated that stocks such as Solana, Ada, and Polygon, as well as the US dollar-pegged stablecoin BUSD and Binance’s own token, BNB, fall into the category of securities. insisted. I think related services also have problems.
The SEC recently noted the following in its Supplementary Notice of Precedent:

Through the court’s analysis of Terraform defendants’ “stablecoin” UST, the court will consider defendants’ claims regarding Binance’s “stablecoin” BUSD and defendants’ staking-as-a-service, BNB Vault, and Simple Earn programs. It will. This is especially relevant in this case.

The SEC’s lawsuit against Binance has many similarities to the Terraform Labs case, so it will be interesting to see how the court responds in the future. In particular, the decision on whether stablecoins qualify as securities is expected to have a significant impact on the future of the virtual currency industry.
Circle, Inc., which provides USDC stablecoin, submitted documents to the court at the end of September last year arguing that “stablecoins for payment themselves do not have the essential characteristics of an investment contract.”
The SEC specifies that one of the criteria for determining a specific asset as a security is that “profits can be reasonably expected through investment activities, but stablecoins are redeemed at a set value.” Because of this nature, Circle argued that it did not meet these criteria. He added that stablecoin users generally do not expect to profit from their purchases.
Connection: US Circle argues in response to SEC and Binance lawsuit that stablecoins are “non-securities.”
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