The US SEC has filed a letter with Judge Jed Rakoff in the ongoing case against Terraform Labs, presenting the argument that the crypto assets should be classified as securities under regulatory definitions.
The letter, dated December 4, outlines the regulator’s position and proposes that the court, rather than a jury, determine whether the tokens in the case are securities.
The SEC’s letter referred to the Howey Test, derived from the 1946 Supreme Court case SEC v WJ Howey Co., to support his argument. The watchdog said courts have always decided such cases as part of the law without the involvement of a jury.
Terra’s tokens are securities: SEC
According to the SEC, Defendants’ offering of crypto assets meets all aspects of the Howey test, which assesses whether there is an investment of money in a joint venture with the expectation of making a profit primarily from the efforts of others.
The committee emphasizes that there is no significant dispute over the facts establishing the nature of the crypto asset offering, framing the issue as a legal question suitable for the court’s decision. The letter cites several legal precedents in which courts have determined an instrument’s status as security, suggesting that this approach is consistent with past legal practice.
Additionally, the SEC cited instances where courts have previously granted summary judgment in similar situations, indicating that such a judgment may also be appropriate in this case. If Judge Rakoff issues summary judgment in favor of the SEC, it would result in the crypto assets being classified as securities.
The SEC’s submission is part of ongoing efforts to address the regulatory status of cryptocurrencies and related assets. As the cryptocurrency market expands, the SEC and other regulators continue to examine how traditional financial market regulations might apply to digital assets.
The decision in the Terraform Labs case will potentially impact how other crypto assets are regulated under US law.
Terra files summary proceedings
The SEC filed a case against Terraform Labs PTE Ltd and its CEO, Kwon Do-hyung, earlier this year on February 16. The charges related to orchestrating a multibillion-dollar crypto asset fraud involving an algorithmic stablecoin and other crypto assets. effects.
Terraform Labs also asked the presiding judge for summary judgment in the case on December 4. The company filing references the SEC’s alleged misrepresentations in a separate case involving DEBT Box, in which Judge Robert Shelby criticized the SEC’s actions.
Terraform’s legal team suggests that this situation is a reflection of the SEC’s handling of evidence and allegations in their own case. The DEBT Box case, which involved alleged SEC misrepresentations, is highlighted as a precedent that could impact Terraform’s case.