- The lawyers of Terraform Labs argued UST was not safe as it was developed for commerce, instead of an investment. There is an ongoing legal war between the U.S. Securities and Exchange Commission (SEC).
- The US court has announced that it will provide a decision as Terraform Labs push to discharge the SEC lawsuit. The decision involves high stakes for both teams, inspiring widespread attention from the regulatory communities and cryptocurrency.
The question of n “investment contract” and whether that concept implements TerraUSD (UST) became the hot topic of the Thursday night hearing on Terraform Labs’ action to discharge a lawsuit carried out by the SEC.
“SEC only wishes to eliminate the word ‘Contract,.’” Douglas Henkin, a legal practitioner with the Dentons law company, spoke for Terraform.
Apart from SEC, several other token issuers also agree that UST did not include a contract, as it was mainly developed for practical uses instead of an investment. Similarly, numerous token issuers argued that their respective cryptocurrencies are not securities and can be used only for practical use.
What happened in the hearing?
Thursday’s hearing, scheduled on 15 June 2023 for 2:00 PM ET postponed to 7:00 PM ET, and Terraform’s legal team cased some additional documents, involving a transcript from the hearing held on Tuesday to deliberate on the SEC’s action for a provisional hold order against Binance. Still, individuals may have staked UST in the anchor agreement with the expectations of a return; the crypt itself should not be expected as a security because of the possible other uses, the defense proclaimed.
SEC’s Devon Staren stated, “The evaluation of whether something is a funding agreement permits for possible consumptive uses.” She added that The demands of investors and the economic truth around the UST token led to SEC’s statement that there were safety breaches.
“We don’t concur that there is an official agreement,” she argued.
In April, Terraform shifted to release the charges, arguing that the SEC has not claimed jurisdiction over the organization or Kwon and creating issues tied to the Administrative Procedures Act.
The senior judge of the US district court, Jed Rakoff, cross-questioned that there is an essential questions dispute, saying Congress aims to provide the SEC broad regulatory authority when filing the laws supervising the agency.
“UST is controlled by the Decentralized team with the help of LUNA token and is different from other capitals/ assets which a centralized party controls. It is the reality that TFL designed the actual protocol, but afterward, it was transformed to the community,” stated Henkin. As a result, Henkin connected UST to Bitcoin.
Henkin conducted several comparisons and analyses, and the judge and Supreme Court’s case is considered to look for assumed identities to UST. As per the Supreme Court’s decision, Congress must permit any chief practices from the EPA as the company’s outdated remit if they are far from what is observed. According to Staren, the SEC only imposes current laws to resist companies from promulgating effective regulations.
At the end of the hearing, Staren stated that “the cryptocurrencies assets are not investment contracts as an individual and LUNA is a piece of code.”
The primary purpose of the hearing is to identify the concept of investment contracts and its application to TerraUSD (UST). As per the hearing, Henkin connected UST to Bitcoin, stating that UST is managed by decentralized teams with the help of LUNA tokens and is not like other assets that centralized parties manage. As a result, cryptocurrencies are not investment contracts, and LUNA is just a piece of code.