SEC wants judge overseeing Terraform case to rule on securities claims

The regulator argued that the status of securities in the Terraform case is up to the court, not a jury


Terra and Neeqolah/Shutterstock modified by Blockworks


The Securities and Exchange Commission is asking Judge Jed Rakoff to rule on whether or not Terraform offered and sold unregistered securities. 

The SEC, in its case against Terraform Labs and former CEO Do Kwon, is making the request to prevent a jury from making a decision on the alleged securities.

The issue at hand, lawyers for the regulatory agency wrote, is a legal question that requires court determination, and is not “a factual question for the jury.”

“There is no dispute, for example, as to any of the facts that establish that Defendants’ crypto asset offerings involved an investment of money, in a common enterprise, with an expectation of profit to be derived from Defendants’ efforts,”  the SEC wrote in the Dec. 4 filing.

“Whether Defendants’ offers and sales of their crypto assets are investments contracts is thus a question of law for the Court, not the jury.”

The SEC goes on to claim that Terra, in its opposition filing to the SEC’s motion for summary judgment, failed to raise issue with the SEC’s allegations that Terra sold and offered unregistered securities in the form of crypto.

Lawyers for the commission believe that the “undisputed facts” they’ve put forward in former filings are enough to “satisfy the governing legal standard” and therefore are enough for Judge Rakoff to rule on.

The case is “straightforward,” the SEC claims and therefore Rakoff should be able to grant a summary judgment — which is “routinely” done in “such circumstances.”

A summary judgment was granted in another crypto case this summer: the SEC’s case against Ripple. However, the outcome was not fully in favor of the regulatory agency. 

Instead, Judge Analisa Torres — a district court judge for the Southern District of New York — ruled that programmatic sales of Ripple’s XRP didn’t pass the Howey test. Institutional sales, she ruled, constituted an unregistered securities offering.  

Rakoff, also a district judge for the Southern District of New York, didn’t seem to agree with the Torres ruling earlier this summer when Terraform attempted to use the ruling to get its case dismissed. 

Rakoff, in his denial, said that the Ripple and Terraform cases are separate, in part due to the SEC’s allegations that Terraform “had the motive to mislead investors about the utility of their crypto-assets” were upheld due to the evidence provided by the Commission.

Rakoff’s opinion also plainly stated that his court “rejects the approach recently adopted by another judge of this District in a similar case,” citing the SEC’s case against Ripple.

Howey, he said, does not make a distinction between institutions that buy crypto or those who purchased the assets via secondary transactions. 

“That a purchaser bought the coins directly from the defendants or, instead, in a secondary resale transaction has no impact on whether a reasonable individual would objectively view the defendants’ actions and statements as evincing a promise of profits based on their efforts,” Rakoff wrote in late July.

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.


Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research



Aerodrome is a "MetaDEX" that combines elements of various DEX primitives such as Uniswap V2 and V3, Curve, Convex, and Votium. Since its launch on Base, it has become the largest protocol by TVL with more than $495B in value locked, doubling Uniswap's Base deployment.


The former Valkyrie CEO chats with Blockworks about what she has her eye on as Cypherpunk Holdings’ new leader


Thursday’s CPI report shows prices are coming down more quickly than analysts had anticipated, renewing hope that central bankers will cut rates in the fall


If we tokenize all assets in a speculative rush, the risk of creating illiquid markets and trapped value will manifest on a large scale


Plus, Trump is headed to the heart of Bitcoinlandia with a speaking appearance at the Bitcoin 2024 conference


Meanwhile, stocks rally after Jerome Powell finishes his Capitol Hill tour


Plus, Blinks have reshaped many people’s understanding of what blockchains are capable of