- U.S. District Judge Jed Rakoff rejected Terraform Labs’ motion to dismiss the SEC’s action against them.
- The SEC has presented compelling arguments to establish jurisdiction over the case, and that TerraUSD (UST), the Anchor Protocol, and LUNA may have violated securities laws.
- Judge Rakoff’s ruling is different from Ripple Labs‘ recent case as he stated that cryptocurrencies should not be classified based on how they are sold.
Terraform Labs Case
The U.S. Securities and Exchange Commission (SEC) had already accused stablecoin issuer Terraform Labs and its founder, Do Kwon, of engaging in fraud and misleading investors about TerraUSD (UST), their stablecoin pegged to the U.S. dollar through the LUNA token. On Monday, however, U.S. District Judge Jed Rakoff refused Terraform Labs’ motion to dismiss this action against them, indicating that the regulatory agency had presented compelling arguments to establish jurisdiction over the case.
Ripple Ruling Rejected
Judge Rakoff’s ruling sets a new precedent in this matter by rejecting Ripple Ruling, which was presided over by U.S. District Judge Analisa Torres regarding SEC’s action against Ripple Labs over XRP, their digital coin. This decision distinguished between tokens sold directly to institutional investors and those sold to regular investors through secondary market transactions; however Judge Rakoff firmly stated that cryptocurrencies should not be classified based on how they are sold but rather on other properties of the assets – even Howey test cannot be used as sole parameter for analyzing digital assets in this regard.
Implications for Other Projects
This development puts Terraform Labs on a collision course with the SEC as the lawsuit moves forward – raising concerns within cryptocurrency industry about potential implications for other projects in it since manner of sale shouldn’t impact whether or not a digital asset should be considered security under federal law according to Judge Rakoff’s ruling .
Positive Impact?Though there is still much uncertainty surrounding crypto regulation in US with regard to how exactly these assets will be treated legally; still some crypto industry experts believe this new legal precedent set by Judge Rakoff could potentially open up more opportunities for projects looking at launching compliant token offerings due to enhanced clarity as far as what comprises security or not is concerned .
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It remains unclear what would happen next in this legal battle between Terra Form Lab and SEC , but one thing is certain that if other crypto projects can take advantage of greater regulatory clarity then it could benefit overall industry by allowing more projects launch compliant token offerings .