SEC Targets Terraform Triumph to Tackle Coinbase and Binance Battles

"SEC's Legal Victories in Terraform Labs Case Set Precedent for Crypto Exchanges Coinbase and Binance, Asserts Regulator"

The U.S. Securities and Exchange Commission (SEC) has been using its recent victory in the Terraform Labs case to strengthen its arguments against crypto exchanges like Coinbase and Binance. The SEC has faced setbacks in its legal battles with Ripple and Grayscale Investments, but it scored a win last week when Judge Jed Rakoff ruled in its favor in the Terra case. The SEC believes that this ruling supports its claims that tokens offered by Coinbase and Binance are unregistered securities.

In a filing on January 4, an SEC lawyer stated that the Terraform court’s decision favored the SEC and should be considered in the ongoing legal clash with Coinbase. A similar filing was made the day before in the SEC’s dispute with Binance, with the intention of highlighting the agency’s success in other cases. While the SEC sees these victories as significant, analysts suggest that they do not negate previous losses or partial wins. Instead, they view these rulings as part of an ongoing process to determine how securities laws apply to crypto products.

Judge Rakoff’s ruling in the Terra case rejected the defendants’ argument that the tokens UST, LUNA, and MIR were not investment contracts. He emphasized that these tokens do fall under the legal definition of securities. The SEC believes that this decision supports its claims against Coinbase and Binance, where it alleges the trading of unregistered securities has taken place. However, it remains to be seen how other judges will interpret these rulings.

Analyst Jaret Seiberg from TD Cowen suggests that the district court decisions on the classification of crypto assets as securities will eventually be overshadowed by federal appeals courts and possibly the Supreme Court. However, he cautions that this process could take years. In the meantime, a trial is scheduled for January 29 to resolve the remaining disputes in the SEC’s case against Terraform and its founder, Do Kwon. Terraform has expressed its strong disagreement with Judge Rakoff’s decision and intends to vigorously defend against the allegations in court.

Coinbase, on the other hand, has declined to comment on the SEC’s recent filing in their case. It is clear that the outcome of these legal battles will have significant implications for the regulation of crypto exchanges and the classification of digital assets as securities. The development of the law in this area will continue as more judges weigh in on the application of securities laws to cryptocurrencies.

Martin Reid

Martin Reid

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