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

share

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.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

Blockworks and Cracked Labs are teaming up for the third installment of the Permissionless Hackathon, happening June 22–23, 2025 in Brooklyn, NY. This is a 36-hour IRL builder sprint where developers, designers, and creatives ship real projects solving real problems across […]

recent research

Unlocked by Template (7).png

Research

Union’s improvements upon Tendermint consensus through CometBLS, coupled with ZK proving through Galois, allow for a broadly scalable, cost efficient, and low latency IBC implementation that is feasibly scalable across every existing blockchain, virtual machine and runtime. The implementation offers modular crosschain interoperability without the need for trusted intermediaries.  

article-image

The drop gives buyers Adidas outfits for their in-game characters, but the game hasn’t fully released yet

article-image

In 1999, Daniel Bernstein fought for code to be protected, just like free speech

article-image

Sentora aims to create an ecosystem focused on institutional investors’ DeFi needs

article-image

Using Bitcoin as a model, Vitalik’s new priority for Ethereum is technical simplicity

article-image

Solana leaders privately told validators to upgrade their software