SEC Aims to Utilize Terraform Court Triumph as Leverage in Lawsuits Against Coinbase and Binance

The Securities and Exchange Commission (SEC) is seeking to leverage a partial victory obtained in its ongoing court battle against Terraform Labs for its separate litigations involving the two leading cryptocurrency exchanges, Binance and Coinbase.

SEC Aims to Utilize Terraform Court Triumph as Leverage in Lawsuits Against Coinbase and Binance

In a filing made on Thursday related to its case against Coinbase, the SEC cited the Terraform Labs court decision in the Southern District of New York. This decision granted a summary judgment affirming that UST, LUNA, wLUNA, and MIR tokens are classified as securities.

The SEC stated, ‘In so doing, the Terraform court resolved in the SEC’s favor issues relevant to the consideration of Defendants’ motion in this case,’ referring to Coinbase’s earlier motion for a judgment in its favor.

This filing is intended to bolster the SEC’s prior opposition to a motion by Coinbase.

An SEC attorney wrote in October, ‘Each crypto asset issuer invited investors – including purchasers on Coinbase’s platform – reasonably to expect the value of their investment to increase based on the issuer’s broadly-disseminated plan to develop and maintain the asset’s value (including through a secondary market for resale).’

Notably, UST, LUNA, wLUNA, and MIR tokens are not explicitly mentioned in the SEC’s complaint against Coinbase. The complaint focuses on a distinct set of tokens that the SEC insists should be considered unregistered securities, including SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH, and NEXO.

Binance case

In a concurrent legal action against Binance, the SEC is endeavoring to employ the Terraform Labs judgment as support for its case. In a separate filing made on Wednesday, the agency urged a D.C. court to consider the Terraform ruling when evaluating Binance’s motions to dismiss the case. The filing emphasized, ‘The court’s analysis of the Terraform defendants’ so-called ‘stablecoin’ UST is particularly relevant to this Court’s consideration of Defendants’ arguments concerning Binance’s so-called ‘stablecoin’ BUSD, and Defendants’ stalking-as-a-service, BNB Vault, and Simple Earn programs.’

The SEC pointed out that Terraform Labs had previously presented arguments akin to those currently used by Binance, attempting to artificially separate the sale of its tokens from the development and promotion of the Anchor protocol, where tokens could be staked to generate profits. The SEC argued that this scenario mirrors Binance’s offering of BUSD along with its stalking-as-a-service, BNB Vault, and Simple Earn program. This alignment, according to the SEC, ‘provides further grounds for this Court to deny Defendants’ motions to dismiss.’