The U.S. Securities and Exchange Commission (SEC) is leveraging the Terraform case ruling to bolster its case against Binance, specifically aiming to classify the cryptocurrency BUSD as a security. The SEC’s recent filing underscores the court’s decision in the Terraform case, where cryptocurrencies like UST, LUNA, wLUNA, and MIR were categorized as securities based on the Howey test.
The Howey Test, a legal standard established by the U.S. Supreme Court, determines whether a transaction qualifies as an “investment contract” and, consequently, a security. It scrutinizes whether money is invested in a common enterprise with a reasonable expectation of profits.
The SEC’s invocation of the Terraform ruling contradicts a previous motion to dismiss the case, filed by BAM Management and BAM Trading in September. BAM Management contended that investments in cryptocurrencies like LUNA did not meet the SEC’s interpretation of an investment contract.
The SEC contends that the funds invested in such tokens were utilized by promoters for developing blockchain functionalities or providing yield-bearing returns. Investors, according to the SEC, stood to gain value based on the promoters’ activities.
The recent judgment in the Terraform case furnishes the SEC with a foundation to argue that the Howey test, a legal standard for determining securities, should also be applicable in the Binance case. The SEC underscores the court’s scrutiny of Terraform’s UST stablecoin as highly pertinent when assessing Binance’s BUSD and other offerings such as BNB Vault and Simple Earn programs. This strategic move by the SEC aims to solidify its position in asserting the regulatory classification of BUSD and related crypto offerings within the Binance ecosystem.
