Court Rules LUNA and MIR Tokens are Securities

Judge Jed Rakoff of the US District Court for the Southern District of New York ruled in a summary judgment on Thursday that Terraform Labs, the company behind the failed stablecoin TerraUSD and the Luna token, violated federal securities laws in selling these tokens to investors.

According to the judgment, Terraform Labs should have registered LUNA and MIR as securities before making them available for purchase. MIR is also a cryptocurrency in the Terra ecosystem, CoinDesk reported.

Judgment is in line with prevailing regulatory opinion

The judgment aligns with regulators' broader assertion that most cryptocurrencies are securities and should be subject to the corresponding regulations. The judgment does not extend beyond the cryptocurrencies Luna and Mir, however.

It could help form a future trial over Terraform's securities violations. The judge denied the plaintiff and the defendant’s efforts to exclude testimony from the opposing party’s expert witnesses, who analyzed market developments that led to TerraUSD’s losing its peg to the US dollar in May 2022.

The judge blocked another two defense witnesses. One would have given the jury an overview of Terraform's crypto economy, and the other would have provided evidence on activities in Terraform's custodial wallets.

As expected, Terraform Labs does not agree the tokens in question are securities. A spokesperson told CoinDesk in an email:

We strongly disagree with the decision and do not believe that the UST stablecoin or the other tokens at issue are securities. Further, the SEC’s fraud claims are not supported by evidence, and we will continue to vigorously defend against those meritless allegations at trial.

Earlier this year, the SEC filed a lawsuit against Terraform Labs and many other leading players in the cryptocurrency industry. This happened a few months after Terraform’s stablecoin lost its peg, which had a domino effect, spilling over into the broader market.