The United States Securities and Exchange Commission (SEC) has opposed Dentons’ motion to dismiss the lawsuit brought by Terraform Labs and Do Kwon, arguing that the additional documents provided by Dentons do not provide sufficient grounds for dismissing the case.
Dentons, the law firm representing Terraform Labs and Do Kwon, had submitted supplementary documents during a court hearing on June 15 to support their motion to dismiss the SEC lawsuit. However, the SEC’s lawyers claimed that the documents, including a Binance.US transcript and internal SEC emails, were irrelevant to the current case. They emphasized that the Howey test clearly defines the criteria for an “investment contract” and insisted that TerraUSD (UST) should be classified as a security.
The hearing aimed to determine whether the digital assets developed by Terraform Labs should be classified as securities under the definition of an “investment contract.” Dentons argued that the algorithmic stablecoin UST should not be considered a security, emphasizing its practical purpose rather than an investment contract.
In support of their motion to dismiss, Dentons submitted additional documents, such as a U.S. House Financial Services Committee hearing on digital asset regulation and stablecoin issuance, the SEC’s request for a restraining order against Binance.US, and the Hinman emails from the SEC vs. Ripple lawsuit.
The defense lawyers highlighted a perceived “regulatory gap” in the classification of crypto assets as securities, especially as the U.S. Congress discusses regulatory frameworks for digital assets and stablecoin issuance.
They further contended that the SEC was going beyond the scope of securities laws by relying on internal emails related to “investment contracts” to determine the security status.
Judge Jed Rakoff, overseeing the case, announced that a decision on the motion to dismiss would be made by July 14.
It is worth noting that Dentons previously represented Kwon in challenging the SEC’s subpoena during the investigation of the Mirror Protocol in 2021 and a class-action lawsuit in the Singapore High Court in 2022. The law firm also represents Terraform Labs in other ongoing cases.
In a separate development, the Basic Court in Podgorica, Montenegro, has granted bail to Kwon and former Terra chief technology officer Han Chang-joon. However, Kwon has been placed in extradition custody in Montenegro as the court evaluates South Korea’s extradition request for the Terra founder.
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