SEC Wins as Judge Challenges Ripple Ruling
Judge denies Terraform Labs' request to dismiss SEC lawsuit, rejecting the use of a ruling from another judge who ruled that Ripple did not violate securities law
A US federal judge has rejected Terraform Labs' request to end a lawsuit from the Securities and Exchange Commission (SEC). The judge stated that the SEC has provided good reasons to believe that Terraform's stablecoin TerraUSD (UST), the Anchor Protocol and LUNA may have broken securities law.
The judge also did not agree with a previous decision that Ripple Labs, Ripple facing similar charges from the SEC, did not break the law by making XRP available on other platforms for regular people to buy.
Terraform and its founder, Do Kwon, were sued by the SEC earlier this year for misleading investors about UST, which is tied to the US dollar using the LUNA token, and for fraud.
Terraform tried to argue that people bought UST for useful reasons, not as an investment. They also pointed to the recent Ripple ruling, saying that buyers could not know they were buying XRP from Ripple because they got the token from other exchanges.
The SEC suggested that it might appeal the decision. During the request to dismiss the lawsuit, the judge stated that the facts in the SEC's complaint must be accepted as true. The SEC argued that Terraform actively encouraged both regular and institutional investors to buy UST.
The judge also rejected Terraform Labs' argument about the "major questions doctrine". This principle stops regulatory agencies from overstepping their authority. Many crypto defendants have used it against the SEC, including Coinbase, a crypto exchange. But the judge said the crypto industry does not meet the necessary standards.
The price of XRP fell around 2% after the ruling, dropping to $0.69 from a high of $0.72 during the day.
