Terraform Labs’ LUNA and MIR Tokens are Securities, Judge Rules

January 15, 2024 | by


In a significant ruling, a U.S. federal judge has declared that Terraform Labs’ LUNA and MIR tokens are securities and were sold in violation of federal securities laws. The ruling comes as part of an ongoing lawsuit filed by the Securities and Exchange Commission (SEC) against Terraform Labs and other prominent players in the cryptocurrency industry. While the judge’s decision could impact the outcome of the trial, it currently only recognizes the SEC’s authority over the Luna and Mir tokens. This ruling aligns with the regulators’ stance that many cryptocurrencies should be classified as securities and subject to oversight.


This article discusses the recent ruling by a U.S. federal judge that Terraform Labs violated federal securities laws by selling its LUNA and MIR tokens without registering them as securities. The judge’s summary judgment sets the stage for a future trial regarding Terraform’s securities violations. The ruling aligns with the Securities and Exchange Commission’s (SEC) belief that most cryptocurrencies should be classified as securities and fall under their regulatory oversight.


Terraform Labs, the creator of the Terra and Luna cryptocurrencies, has faced legal challenges regarding the classification of its tokens as securities. The SEC filed a lawsuit against the company earlier this year, following a series of similar complaints against other prominent players in the crypto industry. The lawsuit came in the wake of the depegging of Terraform Labs’ UST stablecoin, an event that had a significant impact on the crypto industry.

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Summary Judgements

Judge Jed Rakoff of the U.S. District Court for the Southern District of New York issued a summary judgment affirming the SEC’s argument that Terraform Labs violated securities laws. The judge determined that LUNA and MIR should have been registered as securities and that Terraform Labs failed to do so. This ruling establishes the foundation for a potential trial regarding Terraform’s securities violations and sets a precedent for the SEC’s authority over these specific cryptocurrencies.

Terraform Labs’ Violation

Terraform Labs’ violation of federal securities laws stems from the sale of unregistered LUNA and MIR tokens to the public. The company failed to comply with the necessary registration requirements, thereby violating the regulations set forth by the SEC. This violation prompted the SEC to take legal action against Terraform Labs, leading to the recent ruling by Judge Rakoff.

LUNA and MIR as Securities

The court’s summary judgment confirms the SEC’s position that LUNA and MIR should be considered securities. This classification is crucial as it determines the level of regulatory oversight these tokens will face. By treating LUNA and MIR as securities, the SEC gains the authority to supervise their issuance, trading, and other related activities. The court’s decision only recognizes the SEC’s jurisdiction over these specific cryptocurrencies and does not extend to all cryptocurrencies in general.

Impact on Securities Classification

The ruling in favor of the SEC regarding Terraform Labs’ tokens as securities has significant implications for the classification of other cryptocurrencies. It reinforces the SEC’s viewpoint that many cryptocurrencies should fall under the definition of securities. This interpretation gives the SEC greater authority in regulating the crypto industry and ensures compliance with securities laws. Market participants and cryptocurrency issuers will need to pay careful attention to these developments and evaluate the regulatory implications for their own projects.

SEC Lawsuits

The SEC’s decision to file lawsuits against various players in the cryptocurrency industry indicates its commitment to enforcing securities regulations within this rapidly evolving market. By bringing legal action against Terraform Labs and other companies, the SEC aims to protect investors and maintain the integrity of the financial system. These lawsuits serve as a warning to market participants that non-compliance with securities laws can result in legal consequences.

Depegging of UST

The depegging of Terraform Labs’ algorithmic stablecoin, UST, played a pivotal role in the SEC’s case against the company. This event, which occurred in May 2022, contributed to the regulatory scrutiny and ultimately led to the filing of the lawsuit. The depegging event highlighted the potential risks and challenges associated with algorithmic stablecoins and further emphasized the need for regulatory oversight in the crypto industry.

Excluded Defense Witnesses

During the proceedings, Judge Rakoff made rulings regarding the inclusion of defense witnesses in the trial. The judge allowed the testimony of opposing expert witnesses who had studied the trading activity that led to the depegging of UST. However, two defense witnesses were excluded. One witness would have provided insight into Terraform’s custodial wallets’ activity, while the other would have given the jury an overview of Terraform’s crypto economy. The exclusion of these witnesses may impact the defense’s ability to present a comprehensive case.


The recent ruling by Judge Rakoff in favor of the SEC’s arguments confirms that Terraform Labs violated securities laws by selling unregistered LUNA and MIR tokens. This ruling has important implications for the classification of cryptocurrencies as securities and strengthens the SEC’s regulatory authority within the crypto industry. Market participants and cryptocurrency issuers must carefully consider the implications of this ruling and ensure compliance with securities regulations. As the crypto industry continues to evolve, regulatory frameworks will play a vital role in shaping its future.


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