Crypto Council for Innovation, GC Says Terra Judge’s Opinion Doesn’t Contradict Ripple Ruling

General Counsel at Crypto Council for Innovation comments on the Terra verdict, saying Judge Rakoff’s decision in the case does not contradict Ripple’s ruling.

The recent decision made by the Southern District of New York District Judge Jed Rakoff in the SEC v. Terra lawsuit has continued to stir reactions from top crypto enthusiasts.

As reported, Judge Rakoff disagreed with Judge Analisa Torres’ reasoning by refusing to distinguish between institutional and retail sales.

Many legal experts, including Ripple’s CLO Stuart Alderoty, have commented on the development. Some experts suggest that the ruling contradicts Judge Torres’ summary judgment.

Crypto Council GC Thinks Otherwise

However, Ji Kim, the General Counsel at Crypto Council for Innovation, asserted that the Terra ruling does not contradict Judge Torres’ decision that the investment contract is the security, not the underlying asset.

1/ There’s been a lot of commentary regarding J. Rakoff’s opinion in Terra, but there is nothing in there that contradicts J. Torres’ ruling in Ripple that the investment contract is the security, NOT the underlying crypto asset.

— Ji Kim (@_jikim) August 1, 2023

According to Kim, the Terra Judge agreed with the premise that crypto assets are not themselves investment contracts.

To buttress his point, Kim quoted excerpts from Judge Rakoff’s ruling:

“Much as the orange groves in Howey would not be considered securities if they were sold apart from the cultivator’s premise to share any profits derived by their cultivation, the term ‘security’ also cannot be used to describe any crypto-assets that were not somehow, intermingled with one of the investment protocols.” 

Facts About Terra Ruling

Furthermore, Kim shared other exciting facts about Judge Rakoff’s ruling. He noted that the Terra Judge did not consider whether crypto tokens initially sold as investment contracts under Howey qualify as such when they are being traded on digital exchanges.

The legal expert said the judge was not addressing whether digital exchanges can be in an investment contract when no privity exists between them, token issuers, or secondary market traders.

Per Kim, the judge was focused on whether the token issuer marketed the crypto asset in a way that could make purchasers believe their investments would attract significant gains in the future.

He asserted that Judge Rakoff’s decision is non-binding on other courts. Kim urged people to read Judge Rakoff’s decision on secondary market sales in the context of the Terra case alone.

Conclusively, Kim pointed out that judges will always have different conclusions based on the underlying facts.

“This is even more reason for Congress to act on legislation to bring clarity. The HFSC and HouseAg advancing the MS bill was a big first step in this regard,” he added.

12/ As a general matter, judges and cts may come out w/ diff conclusions depending on the underlying facts. This is even more reason for Congress to act on legislation to bring clarity. The HFSC and HouseAg advancing the MS bill was a big first step in this regard.

— Ji Kim (@_jikim) August 1, 2023