Terraform Labs and its founder Do Kwon being in the sights of the United States Securities and Exchange Commission (SEC) have sparked various reactions from lawyers within the crypto community.
On Feb. 16, the SEC accused and charged Kwon and Terraform Labs for allegedly selling a “suite of crypto asset securities.” While community members are not defending Kwon for his actions, they are questioning the manner in which the SEC is going after Terra and its founder.
Web3 lawyer Mike Selig posted his thoughts on the issue on Twitter. According to Selig, the SEC characterizes the algorithmic stablecoin Terra USD (UST) as a security because it could be exchanged for LUNA, now known as Luna Classic (LUNC), which is also a security according to the SEC. Selig explained that under this theory, “nearly anything can be a security.”
Mike Wawszczak, the general counsel for Alliance DAO, also commented on the topic. According to Wawszczak, SEC Chairperson Gary Gensler may want “complete discretion” in applying securities laws to any transactions. He tweeted:
hard to read the SEC v. TFL complaint and not conclude that Chairman Gensler wants complete discretion to apply securities laws to any transaction he wants.
for that job, he requested $2.2 billion in FY 2023.
(for comparison, San Francisco’s budget last year was $13 bil) https://t.co/BlcWyFgp4H
— Mike Wawszczak (@mikedotwaves) February 17, 2023
Justin Browder, a partner at the law firm Willkie Farr & Gallagher, likened the SEC’s description of UST’s use to generate returns on another protocol to “depositing fiat in a bank.” The lawyer also questioned whether there is another non-security currency that does not behave like that. In the end, Browder described the SEC’s actions as “wild.”
Apart from the lawyers, other members of the crypto community also added to the conversation. Dylan Daniel believes that if everything becomes a security, the SEC will have to expand and scale itself. The Web3 community member hopes that Gensler has a solid plan.
On Feb 13, similar sentiments went all over Twitter when the SEC decided to go after Paxos, highlighting that the BUSD (BUSD) stablecoin is a security. Many members of the community were confused and argued that users of the stablecoin do not purchase it and expect its price to go up.