SEC cites Terraform’s ruling in Binance case, claiming BUSD is a security
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The U.S. Securities and Exchange Commission (SEC) has submitted new arguments in its ongoing legal battle with Binance, citing a recent decision involving Terraform Labs.
The SEC’s move is aimed at strengthening its case against Binance, particularly in classifying the cryptocurrency BUSD as a security.inside Latest filingThe SEC highlighted the court’s decision in the Terraform case that cryptocurrencies such as UST, LUNA, wLUNA, and MIR are considered securities under the Howey test.
The Howey test is a legal standard established by the U.S. Supreme Court for determining whether a transaction qualifies as an “investment contract” and therefore as a security. It evaluates whether funds are invested in ordinary businesses with reasonable expectations of profit.
The Terraform ruling cited by the SEC rebutted an earlier motion to dismiss a lawsuit filed in September by BAM Management and BAM Trading. In the motion, BAM Management argued that investments in cryptocurrencies such as LUNA do not constitute investment contracts under the SEC’s interpretation.
The SEC believes that sponsors use funds invested in such tokens to develop blockchain functionality or provide profitable returns, and investors receive value based on the sponsor’s actions.
However, the recent decision in the Terraform case provides the SEC with evidence that the Howey test, the legal standard used to determine what constitutes a security, should also be applied in the Binance case. The SEC emphasized that the court’s analysis of Terraform’s UST stablecoin is highly relevant when considering Binance’s BUSD as well as other products such as BNB Vault and the Simple Earn program.
