A federal judge convened a hearing to address the U.S. Securities and Exchange Commission’s (SEC) ongoing case against Binance, Binance.US, and founder Changpeng Zhao.
TakeAway Points:
- Judge Amy Berman Jackson will revisit her decision in the SEC case against Binance, with an emphasis on the legal position of third-party coins.
- Binance allegedly marketed unregistered securities and neglected to register as an exchange, clearinghouse, or broker, according to the SEC.
- A July 29 deadline is set for filing a proposed schedule for next steps in the ongoing discovery efforts.
Judge to revisit Binance SEC Case
A federal judge convened a hearing to address the U.S. Securities and Exchange Commission’s (SEC) ongoing case against Binance, Binance.US, and founder Changpeng Zhao. The hearing followed Judge Amy Berman Jackson’s June 28 ruling on Binance’s motion to dismiss the SEC lawsuit. During the July 9 hearing, Binance’s attorneys argued that the judge’s ruling implied that third-party tokens, which the SEC alleged were unregistered securities, were excluded from the case.
However, Judge Jackson clarified that this was not her intention, leading to an extensive discussion on whether her ruling had sufficiently addressed both Binance and the SEC’s arguments regarding these tokens.
The SEC’s lawsuit, filed in June 2023, accuses Binance of offering and selling its BNB token and BUSD stablecoin as unregistered securities, failing to register as a broker, clearing agency, or exchange, and commingling customer funds.
The SEC also named 10 cryptocurrencies, including Solana (SOL), Cardano (ADA), and Polygon (MATIC), as unregistered securities. The status of these specific claims was a focal point of last week’s hearing, with potential implications for the scope of discovery and the overall defense strategy for Binance.
Judge’s Previous Ruling
Judge Jackson’s June 28 ruling upheld several of the SEC’s charges against Binance, including those related to staking, the initial coin offering, and ongoing direct sales of the BNB token. However, charges against Binance’s Simple Earn savings accounts, its BUSD stablecoin, and secondary sales of BNB from parties other than Binance were dismissed. The judge indicated that she would review both Binance’s motion to dismiss and the SEC’s opposition memo to reassess the arguments concerning the third-party tokens.
During the hearing, SEC attorney Matthew Scarlato reiterated that Binance’s arguments were addressed in the SEC’s opposition memo, which countered Binance’s claims that the tokens did not meet the Howey Test criteria for securities.
The SEC argued that the tokens were tied to a common enterprise where investors could reasonably expect a profit. The judge’s decision on whether to remove the third-party tokens from the case could significantly impact the scope of discovery and the defense’s burden.
Impact on the market
The outcome of the SEC’s case against Binance could have far-reaching implications for the cryptocurrency market. If the judge decides to exclude the third-party tokens from the charges, it would reduce the number of allegations Binance has to defend against, potentially limiting the scope of discovery. Conversely, if the tokens remain part of the case, the SEC may be entitled to broader discovery, increasing the regulatory scrutiny on Binance and potentially setting a precedent for other crypto exchanges.
The judge also addressed misconceptions about her ruling, emphasizing that it was narrowly focused on the case at hand and did not constitute a broader judgment on stablecoins or secondary crypto transactions. This clarification is crucial for market participants who may have misinterpreted the ruling as a significant regulatory stance on these issues.
