SEC Requests Judge to Rule on Terraform Labs' Unregistered Securities Case

According to Blockworks, the Securities and Exchange Commission (SEC) is requesting Judge Jed Rakoff to rule on whether Terraform Labs and its former CEO Do Kwon offered and sold unregistered securities. The SEC aims to prevent a jury from deciding on the alleged securities, stating that the issue is a legal question requiring court determination, not a factual question for the jury. In a Dec. 4 filing, the SEC claimed 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. The commission's lawyers believe that the undisputed facts they've presented in previous filings are enough to satisfy the governing legal standard, allowing Judge Rakoff to rule on the case. The SEC argues that the case is straightforward and that 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. 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, while institutional sales constituted an unregistered securities offering. Judge 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, which were upheld due to the evidence provided by the Commission. Rakoff's opinion also 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. According to Rakoff, the Howey test does not make a distinction between institutions that buy crypto or those who purchased the assets via secondary transactions.