SEC Lawyers Request Judicial Decisions on Crypto Classification in Terraform Labs Case
Summary:
Lawyers for the US Securities and Exchange Commission (SEC) have asked a judge to decide whether certain cryptocurrencies are securities in a case against Terraform Labs and co-founder Do Kwon. The SEC's argument that the classification of cryptocurrencies as securities is a legal matter, not a factual one for a jury, was presented in a New York District Court. The request opens a debate about the categorization of digital currencies and comes amidst ongoing discussions on the role of SEC in regulating digital assets.
In a lawsuit against Terraform Labs and co-founder Do Kwon, attorneys for the U.S. Securities and Exchange Commission (SEC) have requested the presiding judge to determine if certain digital currencies are considered securities, rather than handing this question to a jury. The SEC presented this argument in a filing in a U.S. District Court in New York on December 4, asserting that cryptocurrencies being classified as securities within the commission's criteria is a legal matter for the courts to decide, not a jury to ponder.
The SEC contends that the question of whether some digital currencies involved in the Terraform Labs case qualify as securities under the Howey test - the commission's yardstick to identify securities - was open for debate. "It can't be disputed that the crypto assets offered by the defendants entailed an investment of funds in a shared venture, with profits expected from the defendants' endeavors," stated the SEC. The commission emphasized that no factual disputes exist about how these digital assets were sold, their offer and sale terms, and what the defendants claimed in their promotional materials.
The SEC has previously classified several digital currencies as securities in numerous lawsuits, notably legal actions against Binance and Coinbase. In a legal battle with Ripple, a federal judge decided in July that Ripple's XRP token didn't automatically qualify as a security, possibly leading to the SEC dismissing charges against Ripple's CEO, Brad Garlinghouse, and executive chair, Chris Larsen.
The classification of digital currencies as either securities or commodities within the U.S. remains a contentious topic among legislators and regulators, and so does the SEC's function in controlling digital assets. Several experts are also predicting that the SEC might soon rule on approving a spot crypto exchange-traded product for the first time.
Published At
12/5/2023 6:37:26 PM
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