What is the dispute about Paxos Trust Company and Binance USD (BUSD) with the US Securities and Exchange Commission (SEC)?

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The US Securities and Exchange Commission (SEC) is reportedly planning to sue Paxos Trust Company over Binance USD (BUSD), a stablecoin it created in partnership with Binance in 2019. The SEC alleges that BUSD is an unregistered security. While lawyers have stated that the answer to whether stablecoins are securities isn't black and white, there exists an argument for it if the stablecoin was issued in the expectation of profits or are derivatives of securities. Aaron Lane, a senior lecturer at RMIT's Blockchain Innovation Hub, said that with stablecoins, a particularly contentious issue will be whether the investment in the stablecoin led a person to an expectation of profit. Lane also explained that a stablecoin might fall under US securities laws if it is found to be a derivative of a security. Stablecoin issuers may resort to the courts to decide the dispute, while many believe the SEC's regulation by enforcement approach is uncalled for.