Key Insights:

• Terraform Labs’ case shapes SEC’s crypto strategy.
• Major questions doctrine pivotal in crypto defenses.
• Past rulings bolster SEC’s position in new battles.

The U.S. Securities and Exchange Commission (SEC) may have made a groundbreaking move in its ongoing legal confrontations with major cryptocurrency entities, such as Coinbase. This newfound momentum stems from the SEC’s recent triumph over Terraform Labs, potentially marking a crucial juncture in these legal proceedings.

The SEC’s Newfound Momentum

Significantly, on July 31, District Judge Jed Rakoff swatted away Terraform Lab’s motion to dismiss. The core of Terraform’s argument centered around the “major questions doctrine,” a principle recently cemented in a 2022 Supreme Court ruling. Consequently, this principle has been a cornerstone for crypto defendants, including Green United and Coinbase.

The SEC, reflecting on their actions might realize the potential benefit of spending more time leveraging this particular victory. In their document dated Aug. 4, they underscored how the decision against Terraform Labs provides further robustness to their case against Green United’s defensive strategies.

Their position in this matter was articulated with definitive clarity. The SEC’s correspondence relayed, “The court dismissed the defendants’ stance that the ‘Major Questions Doctrine’ and the Due Process Clause obstruct the SEC from designating the company’s digital assets as ‘investment contracts.'” This emphasizes the weight of the Terraform Labs’ judgment in ongoing similar litigations.

Besides, the SEC’s stance could offer hints on its strategy against Coinbase, a prominent crypto exchange. Coinbase, in its recent motion to dismiss, leaned on the central questions doctrine, suggesting that the SEC’s foray into regulating secondary crypto trading markets might be overreaching.

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Most important change in the Coinbase vs SEC case:

CB is arguing "major questions doctrine"

This is a statutory interpretation (legal theory essentially) that says only Congress has the right to decide "major questions" https://t.co/KtWYAR7yav

— Adam Cochran (adamscochran.eth) (@adamscochran) June 29, 2023

Understanding the Major Questions Doctrine

The significant questions doctrine emerged from a Supreme Court verdict last year. Congress should make pivotal policy decisions, not delegate them to agencies. For such delegation, agencies need explicit authorization from lawmakers. Hence, this doctrine seeks to maintain the balance of power and ensure agencies like the SEC stay within their boundaries.

Moreover, the SEC vs. Terraform showdown judge firmly opposed this. He opined that Terraform couldn’t use a principle intended for rare scenarios to challenge the SEC’s daily duties.

Additionally, the SEC is familiar with leveraging past victories. In a Ripple Labs case, it highlighted another ruling, emphasizing that long-standing court precedents provided the necessary “fair notice.”

What Lies Ahead for Crypto Entities?

With the SEC’s bolstered confidence post the Terraform decision, crypto entities might need to rethink their defense strategies. While predicting the outcome is too soon, the stakes are undeniably high. As the crypto landscape continues to evolve, these rulings will shape the industry’s future in the U.S.

In conclusion, the SEC’s move to spotlight the Terraform ruling showcases its readiness to mount a robust challenge against crypto entities. As we wait for the next chapter in this unfolding saga, the broader crypto community watches with bated breath, hoping for clarity and favorable regulations.