In a renewed battle with the SEC, Binance and its former CEO Changpeng Zhao (CZ) are pushing back against accusations of unregistered securities offerings. Their argument hinges on a lack of clear regulatory standards from the SEC and a contradiction with previous court rulings.
Binance filed a motion to dismiss the SEC’s amended complaint on November 4th, arguing that the complaint fails to establish a coherent legal basis for classifying crypto transactions as securities. Their lawyers point to a prior court decision that specifically excluded crypto assets from being inherently securities.
The crux of Binance’s argument is the SEC’s alleged inconsistency. The amended complaint seems to contradict the previous ruling by suggesting that secondary market sales of crypto tokens automatically qualify as securities transactions simply because some buyers might anticipate price appreciation.
This, according to Binance’s legal team, demonstrates the SEC’s unwillingness to provide clear guidelines for determining which crypto transactions fall under the category of investment contracts, a key factor in securities regulation.
Furthermore, Binance criticizes the SEC for seemingly classifying nearly all crypto transactions as securities in the amended complaint. They highlight the inconsistency of the SEC dropping claims related to Ethereum transactions being investment contracts. This alleged selective targeting, according to Binance’s lawyers, undermines market confidence as the SEC appears to be picking winners and losers in the crypto space.
This lawsuit is part of a larger legal saga for Binance. In June 2023, the SEC filed a similar complaint against Binance, Binance.US, and CZ, accusing them of operating unregistered exchanges and financial service providers.
While the SEC secured a partial victory, Judge Amy Berman Jackson dismissed key aspects of the case, including the classification of BNB secondary market sales and BUSD programs as investment contracts. The latest amended complaint appears to be an attempt to revive some of those dismissed claims.
Binance’s legal team emphasizes the negative impact of the SEC’s unclear stance. The lack of clear definitions for what constitutes an investment contract creates uncertainty for courts, market participants, and even the SEC itself. This inconsistency, they argue, hinders fair regulatory practices.
It’s important to note that Binance has faced other legal challenges, including a separate case with the Department of Justice (DOJ) resulting in a $4.3 billion fine for anti-money laundering violations in November 2023. CZ also served a prison sentence for his involvement. Despite these hurdles, Binance, under the leadership of new CEO Richard Teng who took over after CZ’s guilty plea, continues to navigate the complex world of cryptocurrency regulation.