Terraform Labs Requests Jury Decision on Regulatory Status of Tokens
Terraform Labs, the creator of the failed Terra stablecoin (UST) and LUNA cryptocurrency, is seeking a jury decision to determine the regulatory status of its tokens. The Securities and Exchange Commission (SEC), however, believes that the judge should make the decision.
In February, the SEC filed a lawsuit against Terraform Labs and its co-founder Do Kwon, alleging that they raised billions from investors through unregistered transactions involving crypto asset securities.
Terraform Labs’ lawyer, David Kornblau, sent a letter to Judge Jed Rakoff arguing that a jury should decide whether UST, LUNA, wLUNA, and MIR tokens are securities. The SEC countered by stating that it is rare for a jury to determine if something is an investment contract or not.
Legal Battles over Cryptocurrency Classification
The classification of cryptocurrencies as securities or not has been a subject of legal battles between the SEC and crypto firms. If a token meets the criteria of an investment contract, such as the Howey test, the issuer must register with the SEC and provide disclosures to investors.
Summary Judgment Request
Terraform Labs previously requested a summary judgment in their favor instead of going to trial. However, if this request is denied, they are asking for a jury trial. They cited the case of Audet vs. Fraiser in 2021 where a jury decided that four crypto assets were not securities. The SEC argues that this was an exceptional case and insists that Terraform Labs sold securities.
Do Kwon was arrested in March for using a fake passport and is currently facing extradition.
Hot Take: Terraform Labs Seeks Jury Decision on Regulatory Status
Terraform Labs, the creator of Terra stablecoin and LUNA cryptocurrency, is pushing for a jury to decide whether their tokens should be classified as securities. This move comes after the SEC filed a lawsuit against Terraform Labs and its co-founder, accusing them of unregistered transactions involving crypto asset securities. The SEC believes that the judge should make the decision, while Terraform Labs argues that a jury should determine whether their tokens meet the criteria of securities. The outcome of this case will have implications for the classification of cryptocurrencies and the regulatory obligations of issuers. It remains to be seen whether the judge will grant a summary judgment or allow the case to proceed to a jury trial.
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