SEC wants court to consider Terraform ruling in Binance case

The SEC, in a Wednesday filing, said the recent Terraform ruling is relevant in its case against Binance


The Securities and Exchange Commission wants the court overseeing its case against Binance to consider the Terraform ruling.

In a notice of supplemental authority filed Wednesday, the SEC argued that the Terraform ruling — which found that UST, LUNA, wLUNA and MIR are all securities under the Howey test — is relevant to the Binance case because the SEC alleges that the stablecoin BUSD is a security. 

The SEC also points out that a prior motion to dismiss — filed by BAM Management and BAM Trading in September — cited Terraform. 

In the dismissal motion, BAM argues that,in the case of LUNA: “The money invested in Gram, Kin, or LUNA went to the promoter; the promoter undertook to use that money to build the blockchain, the functionality for the tokens, or to offer tokens with a yield-bearing return; and the investor could receive value if the promoter did what they promised.”

Read more: Judge sides with SEC in Terraform case on securities sales question 

Terraform’s case, at the time, did not support the “SEC’s unprecedented theory of an investment contract in this case. In fact, they support BAM’s position,” lawyers argued.

But, in the most recent ruling in Terraform, the judge ruled that Howey is a statement of law. 

Additionally, Judge Jed Rakoff said that “Defendants make much of the fact, undisputed by the SEC, that UST on its own was not a security because purchasers understood that its value would remain stable at $1.00 rather than generate a profit.”

“But, beginning in March 2021, holders of UST could deposit their tokens in the Anchor Protocol, which defendants’ efforts developed and which Kwon himself publicly announced would generate ‘by far the highest stablecoin yield in the market,’ with a ‘target’ of ‘20% fixed APR.”

The finding by Judge Jed Rakoff that “offers and sales of UST constituted an investment contract because UST investors could deposit UST into a protocol that Terraform developed and promoted as a profit-yielding opportunity,” support the SEC’s argument against the offer and sale of BUSD, the SEC claimed.

“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’ staking-as-a-service, BNB Vault, and Simple Earn programs,” the SEC argued.

Read more: Terraform Labs founder Do Kwon faces US extradition: WSJ

Terraform, following the ruling, said it “strongly” disagreed with the decision that either UST or the other tokens were securities. 

Binance and Binance US didn’t immediately return a request for comment.

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire 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, 2023

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

Research Report Cover Vertex.jpg


The proliferation of new perp DEXs has led to fragmented liquidity across various DEXs and chains. Vertex, known for its vertically-integrated DEX that includes spot, perpetual, and integrated money markets, is now tackling cross-chain liquidity fragmentation through horizontal integration with the launch of new Edge instances. Vertex's integrated offerings and cross-margined account structure amplify the benefits of new instances: native cross-chain spot trading, optimized cross-chain basis trading, consistent interest rates, reduced bridging friction, and more.


Partnering with EtherFi and Angle, the fully on-chain perp DEX features bespoke collateral



Gavin Wood introduced the next evolutionary step for the Polkadot network: the Join-Accumulate Machine, or JAM


The side events were the places to be at Consensus 2024, according to attendees


Also, who’s come out swinging in the spot ether ETF fee war — and who could undercut them


I know it is not in their nature, but US regulators could learn a lot by researching the digital asset frameworks that overseas regulators have already gotten right


Also, the ETF hype train can count out at least one member