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03/07/24
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U.S. Court Dismisses Part of SEC’s Claims Against Binance
On July 2, Binance revealed that the U.S. District Court for the District of Columbia rejected the United States Securities and Exchange Commission’s (SEC) broad assertion that cryptocurrency tokens are investment contracts subject to the commission’s oversight.
According to the court, the SEC’s focus should be on whether each transaction’s circumstances make it a securities transaction, instead of focusing on the tokens which are not securities. The cryptocurrency exchange thinks this opinion is most remarkable because the SEC asserting that cryptocurrency tokens are investment contracts is a cornerstone of its efforts towards regulating the crypto market via enforcement.
Likewise, the court dismissed the commission’s claim that secondary market sales of BNB tokens on cryptocurrency exchanges classify as securities transactions. Binance finds this decision remarkable as it shows that the commission is limited regarding its enforcement actions against crypto exchanges for facilitating secondary trading, as well as against the crypto industry.
The commission claimed that the crypto exchange’s fiat-backed stablecoin (BUSD) is sold as an investment contract, but the court said that Binance marketed BUSD as a stablecoin, without any facts suggesting that investors expected it to increase in value due to Binance’s efforts. Another point noted is the U.S. Department of Justice deeming stablecoin not a security.
However, the court allowed some of the commission’s claims to proceed, including claims that direct sales of BNB are securities transactions. Binance expects the SEC to prove that customers bought BNB tokens as investments rather than for other uses.
“This decision is more than just a legal win for Binance; it recognizes there are critical limits on the SEC’s regulatory authority over the crypto industry. The court appropriately criticized the SEC’s decision to litigate the billion-dollar industry through a “case by case, coin by coin, court after court” approach, which creates inconsistent results and ambiguity,” said Binance.
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