SEC's Bold Move: Terraform Ruling Shakes Binance Case Foundations

In a recent development, the Securities and Exchange Commission (SEC) has called on the court overseeing the case against Binance to take into account the Terraform ruling. This comes as the SEC contends that the stablecoin BUSD, associated with Binance, should be classified as a security.

Terraform Ruling and its Relevance

The SEC asserts that the Terraform ruling, categorizing UST, LUNA, wLUNA, and MIR as securities under the Howey test, holds relevance in the Binance case. The argument is centered on the SEC's claim that BUSD, a stablecoin, falls under the securities category.

Dismissal Motion Referring to Terraform

Highlighting a prior motion to dismiss filed by BAM Management and BAM Trading in September, the SEC emphasizes that this motion cited the Terraform case. BAM's argument revolves around investments in tokens like LUNA, stating that the money went to promoters who promised value through blockchain development and token functionality.

Terraform's Perspective

Terraform, however, strongly disagrees with the ruling, asserting that neither UST nor the other tokens should be classified as securities. Lawyers argue that Terraform's case does not support the SEC's unprecedented theory of an investment contract.

Judge Rakoff's Perspective

In the recent Terraform ruling, Judge Jed Rakoff asserted that Howey is a statement of law. He acknowledged that UST on its own was not considered a security, but highlighted a shift in March 2021 when holders could deposit tokens into the Anchor Protocol, potentially generating substantial yields.

Relevance to Binance's Case

Judge Rakoff's findings concerning UST being an investment contract due to its profit-yielding opportunities through the Anchor Protocol are crucial, supporting the SEC's stance against the offer and sale of BUSD. The SEC contends that this analysis is particularly relevant to considering Binance's BUSD and its associated programs.

Terraform's Disagreement and Binance's Silence

Despite Terraform's disagreement with the ruling, Binance and Binance US have not provided an immediate response to the SEC's request for comment.

The SEC urges the court to consider the Terraform ruling, emphasizing its relevance in assessing the nature of BUSD and associated programs offered by Binance. The outcome of this consideration could have significant implications for the classification of stablecoins in the broader regulatory landscape.