A new court ruling has reportedly dampened a recent court victory for the cryptocurrency industry.
U.S. District Judge Jed Rakoff ruled Monday (July 31) that cryptocurrencies are considered securities, a decision that allows the Securities and Exchange Commission (SEC) to pursue securities charges against crypto firm Terraform Labs and its founder, CNBC reported Tuesday (Aug. 1).
However, the ruling also complicates the SEC’s litigation against two other crypto firms, Ripple and Coinbase, as it contradicts a July 13 ruling that said that Ripple should not be considered a security in all circumstances.
“The landmark ruling dulls the sharp teeth of the SEC’s ongoing existential threat to the crypto industry in America,” PYMNTS wrote last month.
According to that report, the ruling by U.S. District Judge Analisa Torres — part of the same court as Rakoff — will have broad-ranging repercussions across the digital asset space, which has long maintained that its tokens are not securities contracts.
Rakoff’s ruling acknowledged the previous ruling in the Ripple case, CNBC reported.
“The Court declines to draw a distinction between these coins based on their manner of sale, such that coins sold directly to institutional investors are considered securities and those sold through secondary market transactions to retail investors are not,” Rakoff wrote, per the report. “In doing so, the Court rejects the approach recently adopted by another judge of this district in a similar case.”
In early June, the SEC took action against Binance and Coinbase within 24 hours of each other. In the case of Binance, the regulator filed 13 charges against the company and its founder Changpeng Zhao June 5, accusing them of engaging in “an extensive web of deception, conflicts of interest, lack of disclosure and calculated evasion of the law.”
Binance responded by saying it was “disappointed” with the SEC’s decision and said it would “vigorously” defend its platform.
The following day, the SEC sued Coinbase for securities law violations. That company, like Binance, is fighting the agency’s claims.
As for TerraForm Labs, the SEC accused the company and founded Do Hyeong Kwon in February of illegally marketing crypto assets to investors to earn a profit while misleading them about the value and stability of their products.
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