The SEC References Terraform Labs Ruling in Binance Lawsuit

In the ongoing legal battle between Binance, Binance.US, former CEO Changpeng ‘CZ’ Zhao, and the U.S. Securities and Exchange Commission (SEC), the SEC has submitted a notice of supplemental authority to the court. The SEC has referenced the recent ruling in SEC v. Terraform Labs, which clarified that UST and LUNA should be classified as securities, in order to support its case against Binance and its affiliates.

By invoking the decision in SEC v. Terraform Labs, the SEC aims to reinforce the definition of an “investment contract” and counter any attempts by the defendants to disregard established legal principles. In the Terraform Labs case, the court applied the Howey Test to determine that UST, LUNA, wLUNA, and MIR should be considered investment contracts and therefore fall under the category of securities. This action highlights the SEC’s commitment to upholding long-standing laws and preventing violations in the digital asset industry.

The relevance of the Terraform Labs ruling extends to the Binance case, as the court had previously granted summary judgment to the SEC in Terraform Labs for violating Section 5 of the Securities Act of 1933 and failing to adhere to exemptions under Regulations by selling securities to U.S. investors. Now, judges in the Binance lawsuits argue that Binance may be engaging in similar practices. This development further strengthens the SEC’s assertion that Binance’s actions constitute securities offerings that are subject to regulation under U.S. law.