The Securities and Exchange Commission (SEC) is coming after crypto exchanges Binance and Coinbase with renewed vigor. As part of its efforts to secure victory in the ongoing legal battles against these exchanges, the Commission has brought the court’s attention to a recent landmark case to bolster its arguments.
SEC Cites Ruling In Terra Case In Its Case Against Binance
The SEC recently filed a notice of supplemental authority in its case against Binance. The Commission drew the court’s attention to Judge Jed Rakoff’s ruling in the Terraform case. The regulator believes that a number of issues resolved in its favor in that case are similar to the ones that Binance has raised.
On December 28, Judge Rakoff gave a summary judgment in the SEC’s favor as he ruled that the LUNA and UST tokens were indeed securities. Just like the Terra case, the Commission’s case against Binance revolves around the latter’s alleged violation of Securities laws.
Alluding to the decision in the Terra case, the SEC argued that Binance could not ask the court to set aside the Howey test in determining whether or not to dismiss the case. The Commission noted that Judge Rakoff had ruled that the test remains a binding statement of law and cannot be treated as a dicta.
Furthermore, the SEC, still citing Judge Rakoff’s ruling, noted that the court had pointed to programmatic sales of LUNA on exchanges like Binance and deemed them investment contracts also. As such, the Commission argues that the manner in which these “crypto asset securities” were sold does not matter when considering whether or not they are securities.
Total market cap at $1.61 trillion | Source: Crypto Total Market Cap on Tradingview.com
SEC Crypto Quest Includes Coinbase
The SEC also filed a notice of supplemental authority in its case against Coinbase. In the letter addressed to Judge Failla, the Commission drew her attention to the court’s ruling in its case against Terraform Labs in support of its opposition to Coinbase’s motion.
The SEC is relying on this case as it believes some issues resolved in its favor in that case are relevant when Judge Failla is considering the defendant’s motion. The crypto exchange had filed a motion to dismiss the case, arguing that the SEC lacked jurisdiction.
Interestingly, the Commission had sued Coinbase just a day after commencing the lawsuit against Binance. The SEC alleges that Coinbase broke the law by offering and trading unregistered securities. Some of the notable tokens that the SEC is referring to as securities in the lawsuit include SOL, ADA, MATIC, FIL, and SAND.
Having brought the Terra case to their notice, the courts in both cases will need to consider the reason for Judge Rakoff’s decision and decide whether or not it applies to the issues in focus. They will also be guided by Judge Analisa Torres’ ruling in the SEC’s case against Ripple.
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Author: Scott Matherson