Feb 18, 2023
SEC Accused of Overreaching with Terraform Labs Charges
The United States Securities and Exchange Commission (SEC) is taking legal action against Terraform Labs and its founder, Do Kwon. This has sparked a range of reactions from the crypto community, with lawyers and other members of the web3 space sharing their thoughts on the matter.
The SEC has accused Kwon and Terraform Labs of selling a “suite of crypto asset securities.” While community members are not defending Kwon’s actions, they are questioning the manner in which the SEC is pursuing the case.
Mike Selig, a web3 lawyer, shared his opinion on the issue via Twitter. Selig believes that the SEC is characterizing the algorithmic stablecoin TerraUSD Classic (USTC) as a security because it can be exchanged for Luna Classic (LUNC), which the SEC has also deemed to be a security. Selig argues that if this is the case, “nearly anything can be a security.”
Mike Wawszczak, the general counsel for Alliance DAO, suggested that SEC Chairperson Gary Gensler may be seeking “complete discretion” in applying securities laws to any transactions. Wawszczak notes that Gensler has requested $2.2 billion in funding for FY 2023 to carry out this job.
Justin Browder, a partner at the law firm Willkie Farr & Gallagher, compared the SEC’s description of USTC’s use to generate returns on another protocol to “depositing fiat in a bank.” Browder expressed his confusion about the SEC’s actions, describing them as “wild.”
Other members of the crypto community have also weighed in on the issue. Dylan Daniel believes that if everything becomes a security, the SEC will need to expand and scale itself. He hopes that Gensler has a solid plan in place.
The SEC has also recently taken action against Paxos, claiming that the Binance USD (BUSD) stablecoin is a security. This decision has been met with confusion from many members of the crypto community, who argue that users of the stablecoin do not purchase it with the expectation of its price increasing.
This case has raised a number of questions about the SEC’s approach to regulating the web3 space. It is clear that the crypto community is keen to understand how the SEC will regulate NFTs, crypto assets, and other web3 technologies.
The case has also highlighted the importance of NFT marketing, crypto promotion, and NFT promotion. As NFTs become increasingly popular, crypto companies are looking to Twitter NFT marketing, NFT marketing agencies, and web3 agencies to help them sell NFTs and promote their projects. It remains to be seen how the SEC will respond to this growing trend.
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