Analysis of Recent SEC v. Terra Ruling and its Alignment with Ripple Decision

A Recent Ruling on Crypto Assets Sparks Debate

A recent ruling in the SEC v. Terra lawsuit has caused a lively debate among legal experts and crypto enthusiasts. Some argue that the ruling contradicts a previous decision on investment contracts and crypto assets. However, Ji Kim, the General Counsel at the Crypto Council for Innovation, disagrees and offers a comprehensive analysis to reconcile the two decisions.

Key Points:

Ji Kim asserts that there is no contradiction between the Terra ruling and Judge Torres’ ruling in Ripple. Both rulings maintain that the investment contract, not the underlying crypto asset, is considered a security.
Kim highlights Judge Rakoff’s analogy of selling orange groves, stating that selling individual orange groves does not make them securities. Similarly, selling crypto assets not tied to specific investment protocols or ecosystems does not make them securities.
Judge Rakoff clarifies that stablecoins designed to maintain a 1:1 peg with another asset would not reasonably be expected to generate profits as part of a common enterprise, which helps define the boundaries of what can be considered an investment contract in the context of crypto assets.
Rakoff’s focus was on cases where marketing could mislead buyers into thinking their purchase would be pooled for future investment returns.
Ji Kim calls for legislative clarity on crypto asset regulations and emphasizes the importance of considering the underlying facts in each ruling.

Hot Take:

The recent ruling in the SEC v. Terra lawsuit has sparked an important debate in the crypto community. While some argue that it contradicts previous decisions, Ji Kim’s analysis provides a compelling explanation for the consistency between the Terra ruling and Judge Torres’ ruling in Ripple. The key issue of identifying the security between the investment contract and the underlying crypto asset remains unchanged. This ruling brings much-needed clarity to the boundaries of what can be considered an investment contract in the context of crypto assets.