SEC Pushes Back Against Binance’s Dismissal Attempt, Alleging Unregistered Securities Offering
The legal battle between the US Securities and Exchange Commission (SEC) and Binance has intensified as the regulatory body strongly counters Binance’s attempt to dismiss the lawsuit filed against it. The SEC’s recent filing challenges Binance’s legal standing, describing the cryptocurrency exchange’s interpretations of federal law as “distorted” and “tortured.”
Initiated by the SEC in June, the lawsuit alleges that Binance, Binance.US, and Binance founder Changpeng “CZ” Zhao offered unregistered securities to investors. The SEC’s latest filing argues that Binance’s motion to dismiss lacks a legal foundation and asserts that the exchange’s arguments would disrupt established legal precedent underpinning US securities laws.
Central to the SEC’s case is the claim that Binance’s sale of the BNB token during an initial coin offering and its Binance USD (BUSD) as an investment contract violated securities laws. The SEC also contends that Binance’s staking and earn programs ran afoul of federal securities regulations.
Binance and Zhao had sought dismissal, arguing against unproven securities law violations and claiming SEC overreach. However, the SEC asserts that Binance’s proposed “rigid framework” lacks grounding in existing law or case precedent, challenging the cryptocurrency exchange’s interpretation of federal regulations.
The SEC’s Memorandum of Law opposing Binance’s dismissal motions presents a robust case against the defendants. It alleges that Binance acted as an unlicensed US securities exchange, evading regulations and profiting from US markets. The regulatory body outlines Binance’s purported control over US entities BAM Trading and BAM Management, used to operate the Binance.US Platform. The SEC claims that Zhao orchestrated non-operation in the US while secretly profiting from its markets.
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The agency’s complaint includes detailed allegations that Binance, through its platforms, offered and sold assets as investment contracts, classifying them as securities under federal laws. The SEC emphasizes that Binance and Zhao’s arguments attempt to rewrite the legal framework established by the Howey test, a key precedent in determining what constitutes a security.
As the SEC pushes for accountability under existing securities laws, this legal battle represents a critical juncture in the regulation of cryptocurrency exchanges and their compliance with US securities laws. The outcome of this case will likely have implications for the broader cryptocurrency industry and its interaction with regulatory frameworks.
