Binance, the world’s largest cryptocurrency exchange, along with its former CEO Changpeng “CZ” Zhao, have filed motions in court to dismiss the lawsuit brought against them by the U.S. Securities and Exchange Commission (SEC). The legal filings argue that the SEC has not met the necessary legal thresholds to justify its claims, particularly with regard to the nature of cryptocurrencies as securities.
The SEC initiated legal action against Binance, Zhao, and related entities in June 2023, accusing them of violating securities laws through the operation of unregistered exchanges, brokers, and clearing agencies. The charges also included allegations of mishandling customer funds, misleading investors, and engaging in unregistered securities offerings.
In their defense, Binance and CZ assert that the SEC’s arguments do not hold under the “Howey Test,” a legal standard for determining what constitutes an investment contract. They claim that the SEC failed to show how transactions on their platforms meet this test, arguing that the agency is overreaching in its attempt to regulate the crypto industry without clear congressional authorization. Additionally, they allege that the SEC’s claims lack specificity and fail to demonstrate that the tokens in question are securities.
The filings also touch on the major questions doctrine, suggesting that significant regulatory matters like those involving cryptocurrencies should be addressed by Congress, not through agency enforcement actions. This argument has been contentious in other crypto-related lawsuits, with mixed judicial responses regarding the scope of the SEC’s power over digital assets.
This legal battle is crucial for Binance, which has been striving to navigate the complex regulatory landscape in the U.S. after CZ stepped down as CEO in November 2023 following a separate settlement with the Department of Justice over anti-money laundering violations. The outcome of this case could set important precedents for how cryptocurrencies are regulated in the U.S.
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