SEC refuted Binance's claims | Credit: Shutterstock
Key Takeaways
- SEC refuted Binance’s claims of a lack of legal foundation for the lawsuit.
- The regulator accused Binance of misapplying the law and distorting established legal principles.
- Binance allegedly violated the Howey Test and its offspring by offering unregistered securities.
- It also denied any wrongdoing and claims that the SEC is overreaching its authority.
The ongoing legal battle between the United States Securities and Exchange Commission (SEC) and Binance Holdings Limited, along with its creator Changpeng Zhao and two US-based Binance entities, continues to unfold.
The SEC filed a lawsuit in August, accusing these entities of offering unregistered securities backed by digital assets. Now, it has refuted Binance’s claims of a lack of legal foundation for the move to dismiss the action.
SEC Rejects Binance’s Bid To Dismiss Securities Case
The securities regulator asserts in a court document dated November 8 that the defendants misapplied the law in an effort to avoid prosecution and that no US court has been bound by the false legal defence, calling it a “tortured interpretation of the law.”
In June, the Commission brought legal action against Binance on the grounds that it provided trading services for unregistered securities and engaged in asset commingling, among other violations of federal securities law.
One day later, Coinbase was also the target of similar accusations. Both exchanges vowed to forcefully defend their positions and seek appropriate crypto rules from the courts, which is why Binance filed a request to dismiss the lawsuit.
SEC Responds Back
The SEC emphasized that the company cannot evade accountability for its actions by distorting established legal principles within the justice system.
“Defendants now seek to avoid the repercussions of their actions by asking this Court to dismantle decades of foundational precedent upon which the nation’s securities laws operate. In its place, Defendants would install a rigid framework that turns entirely on contract law and the form transactions take, in clear contravention of Congress’ broad, flexible regime.”
The Commission duly highlighted in the brief that their conduct violated the legal requirements outlined in the Howey Test and its offspring. It claimed that the public can access around 12 digital assets and three investment programmes that meet the criteria for investment contracts through its two platforms, Binance.com and Binance.US.
In addition to alleging violations of BNB’s original coin offering, staking, and yield programmes, the regulator supported its lawsuit by citing the Supreme Court’s “Major Questions Doctrine,” which holds that agencies were not granted Congressional authority.
A number of cryptocurrency companies have used the decision as justification to criticise the SEC and the Commodities Futures Trading Commission for taking severe measures against the industry and for having overreached authority.
Lastly, the Commission reiterated Changpeng Zhao and Binance’s strategy to make money in the US market while attempting to absolve themselves of accountability by founding Binance.USA.
Binance Defence
Following the regulator’s case, Binance declared that it had not broken any laws and that the SEC had not “plausibly alleged” any infractions of securities laws.
The exchange added that the Commission is attempting to regulate digital assets outside of Congress’s purview and that it has overreached the definition of “investment contracts.”
“The SEC recently brought several enforcement actions – including this action – premised on its new position that virtually all crypto assets, and virtually all crypto-asset transactions, are securities.”
Legal Battle Over Crypto Regulation Looms
The SEC’s refutation of Binance’s claims is a significant development in the ongoing legal battle between the two parties. It suggests that the SEC is confident in its case and will fight it out in court.
The outcome of this case could have a major impact on the cryptocurrency industry as a whole. In fact, if the SEC wins, it could force Binance to change its business practices or even shut down its operations in the US.
On the other hand, if Binance is successful in getting the lawsuit dismissed, it could set a precedent for other cryptocurrency exchanges and help to clarify the regulatory landscape for digital assets in the US.
The legal battle between the SEC and Binance is likely to be long and complex. It will be interesting to see how the case unfolds and what impact it has on the cryptocurrency industry.
