The U.S. Securities and Exchange Commission (SEC) has been blowing a horn in its various legal clashes with crypto exchanges, asking courts to see how its recent win in the Terraform Labs dispute should convince other judges that the regulator is right about platforms like Coinbase and Binance trading unregistered securities.

While the SEC has suffered a number of setbacks in its crypto court cases, such as in its lawsuit against Ripple and in Grayscale Investments' success challenging the agency's spot bitcoin exchange traded fund (ETF) application rejection, the regulator chalked up a victory last week in its contention that Terraform was improperly offering securities through its Terra/Luna stablecoin offerings and the Mirror Protocol.

"The Terraform court resolved in the SEC’s favor issues relevant to the consideration of defendants’ motion in this case," an SEC lawyer submitted to Judge Katherina Polk Failla in a January 4 filing in its court clash with Coinbase. That follows a similar filing the day before in the SEC's dispute with Binance, meant to point out to other judges that the agency's argument had prevailed elsewhere.

Judge Jed Rakoff, the U.S. District Court for the Southern District of New York judge overseeing the Terra case, sided with the SEC in an end-of-year ruling. In it, he said that the case from defendants Terraform and founder Do Kwon "asks this court to cast aside decades of settled law of the Supreme Court," the judge determined. "The court declines the defendants' invitation."

"There is no genuine dispute" that tokens UST, LUNA and MIR are investment contracts in this context, according to Rakoff's decision.

The SEC contends that the finding on those tokens overlaps with accusations in the Coinbase and Binance cases, in which the platforms are accused of hosting the trading of unregistered securities. Other judges may not see it the same way.

"It does not negate prior SEC court losses or partial wins," TD Cowen analyst Jaret Seiberg wrote in a client note. "Rather, it is a continuation in the development of the law as more judges assess how the securities laws apply to crypto products."

Seiberg noted that decisions at the district court level on which crypto assets fit the legal definition of a security will eventually be overshadowed by the federal appeals courts and, possibly, the Supreme Court. But he said "that process will take years."

A trial is set for January 29 to settle the remaining disputes in the SEC case against Terraform and Do Kwon. A spokesperson told CoinDesk the company strongly disagrees with Rakoff's decision and "will continue to vigorously defend against those meritless allegations at trial."

A spokeswoman for Coinbase declined to comment on the SEC's most recent filing in that case.

Regulations terraform labs Terra luna UST Mirror Protocol Luna Securities and Exchange Commission Legal

Jesse Hamilton

Jesse Hamilton is CoinDesk's deputy managing editor on the Global Policy and Regulation team, based in Washington, D.C. Before joining CoinDesk in 2022, he worked for more than a decade covering Wall Street regulation at Bloomberg News and Businessweek, writing about the early whisperings among federal agencies trying to decide what to do about crypto. He’s won several national honors in his reporting career, including from his time as a war correspondent in Iraq and as a police reporter for newspapers. Jesse is a graduate of Western Washington University, where he studied journalism and history. He has no crypto holdings.