Interesting developments continue to occur regarding lawsuits related to the cryptocurrency markets. In this context, attorneys from the United States Securities and Exchange Commission (SEC) have requested that a judge, rather than a jury, determine whether certain crypto assets should be classified as securities in a case filed against Terraform Labs and its co-founder Do Kwon.
In a filing made on December 4th in the Southern District of New York, the SEC argued that the question of whether cryptocurrencies should be classified as securities according to the commission’s guidelines is not a factual question for the jury, but a legal question that should be determined by the court.
According to SEC officials, the lawsuit against Terraform Labs has sparked a debate on whether certain cryptocurrencies should be classified as securities under the Howey test. SEC officials made the following defense:
“There is no genuine material disagreement that Defendants’ cryptocurrency offerings involve an investment of money in a common enterprise with profits expected solely from the efforts of others. While the court may pose factual questions to the jury to resolve factual disagreements on the essential elements, there are no such factual disputes here. There are no factual questions as to how Defendants marketed and sold their cryptocurrency assets, the terms of these offerings and sales, or what Defendants said in their marketing materials or surrounding promotions.”
The SEC is currently tasked with classifying various cryptocurrencies as securities and has taken various steps, including imposing sanctions on Binance and Coinbase. In a lawsuit filed against Ripple, a federal judge ruled in July that XRP does not need to be classified as a security, allowing the SEC to drop its charges against Ripple Labs CEO Brad Garlinghouse and Chairman Chris Larsen.
The question of which cryptocurrencies will be classified as securities or commodities in the United States has sparked an ongoing debate between legislative bodies and regulators about the role the SEC should play in the legal regulation of crypto assets. Many experts predict that the SEC may soon decide whether to approve a product traded on a spot crypto exchange for the first time.