In its ongoing lawsuit against blockchain startup Terraform Labs, the Securities and Exchange Commission (SEC) urged a judge on Monday to rule on whether or not certain cryptocurrencies qualify as securities.
The SEC stated in the court document that there is no question that investments linked to the company’s operations are involved in the cryptocurrency tokens that Terraform Labs offers. As a result, the commission thinks that rather than a jury trial, the issue should be decided as a legal question by the presiding judge.
SEC Wants to Set Precedent on Terraform’s Crypto as Securities
The SEC’s move seeks to bypass a jury decision on the critical issue of whether the tokens offered by Terraform Labs meet the legal definition of a security. If deemed securities, the tokens would fall under the regulatory purview of the SEC.
The commission asserted that the details of Terraform Labs’ cryptocurrency offerings are transparent, involving financial investments in a joint venture whose success is reliant on the labor of others. The SEC believes that because of these undeniable facts, cryptocurrencies ought to be categorized as securities.
“There are no factual questions concerning how Defendants’ crypto assets were sold, the terms of those offers and sales, or what Defendants said in their marketing materials or promotions surrounding them,” the SEC filing stated.
The regulator believes the judge should rule that Terraform Labs’ cryptocurrency offerings checked all the boxes of the Howey Test, the longstanding criteria used to deem if an asset is a security.
Court Ruling Could Expand or Limit SEC’s Crypto Authority
This push by the SEC comes as the agency ramps up crypto enforcement. The SEC previously deemed Ripple’s XRP as a security, though in July a judge ruled that XRP does not necessarily meet the Howey Test parameters.
For now, the SEC is pressing ahead assertively with its crypto regulation campaign. By pushing for the judge to decide on the security status, the regulator seeks to assert greater control in its ongoing struggle to regulate cryptocurrencies. This would mark a major win for the SEC’s bid to expand its authority over cryptocurrencies. The court has yet to issue a ruling on the SEC’s request, however, so the jury is still out on whether the judge will deliver the verdict the agency seeks.