SEC Challenges Binance’s Motion to Dismiss Securities Lawsuit
The US Securities and Exchange Commission (SEC) has recently taken steps to uphold its lawsuit against Binance, Binance.US, and former CEO Changpeng Zhao, alleging that they have operated an unregistered securities exchange by offering ten different cryptocurrencies for sale, including Binance’s BNB, on the secondary market.
The SEC’s case, filed in the U.S. District Court for the District of Columbia, argues that these cryptocurrencies meet the criteria of securities based on the Howey test, a standard established by the U.S. Supreme Court in 1946. The SEC’s detailed breakdown of each aspect of the test confirms its stance on the issue.
Following initial concerns raised by Judge Amy Berman Jackson, the SEC was asked to revise its original complaint. In response, Binance’s defense contends that the SEC’s allegations are legally unsound and that the agency is misinterpreting securities law in the digital asset landscape.
In addition to addressing the specifics of the case, the SEC has also commented on broader criticism related to its cryptocurrency regulatory approach. Despite concerns regarding excessive regulatory control, the SEC maintains that such assertions have not materialized on the scale suggested.
The lawsuit, initially filed on June 5, 2023, focuses on ten specific cryptocurrencies, including Solana (SOL), Cardano (ADA), Polygon (MATIC), and Filecoin (FIL). A similar case was filed against Coinbase a day later, involving an additional 13 tokens. In total, the SEC has identified 68 cryptocurrencies as securities in its legal actions.
One key point of dispute revolves around the SEC’s perspective on “blind” transactions, which occur when buyers are unaware of the seller’s identity, a common practice on various exchanges. While the SEC argues that such transactions should be considered securities due to potential value appreciation expectations, Binance’s legal team points to a previous ruling in the Ripple case that dismissed similar claims.
Furthermore, Binance’s defense highlights inconsistencies in the SEC’s amended complaint, arguing that the agency is treating nearly all crypto transactions as securities transactions without adequately considering the unique legal and transactional circumstances at play.
