Cryptocurrency exchange Binance has taken another step in its legal battle with the United States Securities and Exchange Commission (SEC). The exchange has filed a new request to dismiss the SEC’s updated lawsuit alleging regulatory violations regarding cryptocurrencies. In the filing filed on November 4, lawyers for Binance and former CEO Changpeng “CZ” Zhao argued that the SEC’s filing was “legally invalid.”
New developments in the Binance and SEC case
In its updated complaint file submitted in September, the SEC targeted some popular cryptocurrencies such as Axie Infinity Shards, Filecoin, Cosmos, The Sandbox (SAND) and Decentraland (MANA). The Commission claims that these crypto assets should be considered “investment contracts”. However, Binance’s legal defense team does not find the SEC’s effort to associate crypto assets with investment contracts correct and states that such claims are “legally invalid.” Lawyers argue that the court has previously ruled that such assets cannot be considered “securities” per se, and that each transaction must be legally examined in its own context.
Reminding that the SEC had previously made similar claims regarding the Ripple company’s XRP sales, Binance’s defense team states that the court stated in that case that XRP token sales did not have the status of “securities”. At that time, US District Judge Analisa Torres stated that some XRP sales by Ripple were insufficient to argue that investors expected the assets to appreciate in value.
“Blind transactions” and SEC allegations
At the center of the SEC’s allegations against Binance is a type of transaction called “blind transactions.” Blind transactions refer to situations where it is not known exactly who is buying or selling an asset. The SEC argues that some BNB sales on Binance’s Binance and Binance.US platforms should also be considered in the category of blind transactions. Allegedly, users were making transactions on these platforms without knowing that they were purchasing tokens from Binance Holdings Limited (BHL).
Binance, on the other hand, argues that such transactions are not deceptive for investors and claims that these accusations made by the SEC regarding blind transactions are invalid. The company’s defense team emphasizes that each crypto asset sale, when evaluated independently, complies with securities laws. Binance argues that the case should be dropped completely on the grounds that these claims have no legal validity.
The SEC filed a lawsuit against Binance in June 2023, claiming that the exchange violated US securities laws. The SEC, which particularly criticized the creation of investor expectations that crypto assets would gain value, cited many examples to justify its claims. At this point, Binance and CZ demand that the case be dropped, emphasizing that the accusations made by the SEC are legally invalid.
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