Binance Defense Picks Up Steam When Experts Doubt Terra Ruling’s Effect

The recent legal clash between the US Securities and Exchange Commission (SEC) and Binance has taken an intriguing turn, as the SEC filed a notice of supplemental authority citing the judgment in SEC v. Terraform Labs as a significant precedent. The SEC’s strategic move aims to leverage the Terra ruling in its case against Binance, Binance.US, and former CEO Changpeng ‘CZ’ Zhao.

Terra Ruling In Binance And Coinbase Lawsuits

Legal expert Bill Morgan, known for his pro-crypto stance, challenges the relevance of the Terraform Labs decision to the SEC’s case against Binance and Coinbase. Morgan argues that the Terra ruling, which revolves around the marketing of UST, LUNA, and yield through Anchor Protocol by Do Kwon, may not be directly applicable to the SEC’s arguments.

  • Weisberger’s Perspective: Dave Weisberger, co-CEO of CoinRoutes, highlighted that the Terra case’s focus was on defining an investment contract rather than the tokens themselves. This distinction is crucial to understanding the SEC’s argument and potential impact on the crypto industry.
  • Morgan’s Counterargument: Morgan agrees with Weisberger’s assessment, suggesting that the Terraform Labs case’s application of the Howey test may be as singular and standalone as the Torres decision on Ripple’s sale of XRP. He emphasizes that legal cases often turn on specific facts, particularly when key legal issues are sensitive to specific circumstances.
  • Limited Relevance: Morgan notes that the Terra ruling may have limited relevance and persuasive value in the context of the Coinbase and Binance lawsuits. He emphasizes the need to carefully examine the specific facts and legal issues involved in each case, highlighting the uniqueness of each situation.

SEC’s Reliance On Terra Case

As reported by Bitcoinist, the SEC’s argument centers around the Terra case’s interpretation of the “investment contract” definition within cryptocurrency offerings. The SEC contends that the Howey Test’s application by the court to classify UST, LUNA, wLUNA, and MIR as investment contracts and securities is directly relevant to the products and services offered by Binance.

  • Products and Services: This includes BUSD (Binance USD), the staking service BNB Vault, and the Simple Earn program. The SEC emphasizes that the Terra ruling should influence the court’s decision on Binance’s dismissal motion, highlighting the relevance to defendants BAM Trading Inc. and BAM Management US Holdings Inc.
  • Morgan’s Challenge: In contrast to the SEC’s position, Bill Morgan’s analysis challenges the notion that the Terra ruling directly applies to the SEC’s case against Binance and Coinbase. Morgan argues against the SEC’s attempt to extend the ruling’s reach to digital assets and services offered by the exchanges, maintaining that the tokens and services fall outside the purview of securities law.


As the legal proceedings between the SEC and two of the most important crypto exchanges in the world unfold, the court will need to carefully consider the facts and legal arguments presented by both sides to determine the applicability and persuasive value of the Terra ruling.

Featured image from Shutterstock, chart from source

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