The US Securities and Exchange Commission (SEC) has rejected efforts to dismiss its lawsuit against cryptocurrency exchange Binance, its US branch Binance.US and former CEO Changpeng Zhao.
The regulator accuses them of running an unregistered stock exchange by trading BNB, Binance’s native token, and ten other cryptocurrencies.
Presentation details
The case relies on the Howey test, a legal standard used to determine whether something qualifies as security. In simple terms, the test examines whether there was an investment of money, a common enterprise, and an expectation of profit derived from the efforts of others.
The SEC claims that the Binance case meets all three criteria. He says the exchange led users to believe that the value of their tokens depended on the success of the Binance ecosystem, creating an expectation of profit.
Is presentation goes further to question Binance’s position that secondary market transactions fall outside the scope of securities laws, stating that such transactions are also governed by the Howey Test.
The financial watchdog’s lawsuit, which was first filed earlier this year, faced criticism from Judge Amy Berman Jackson, who questioned some of its arguments. This led the SEC to amend its complaint. Binance and Zhao responded for accommodation a motion to dismiss the amended complaint on Nov. 4, arguing that the regulator did not provide sufficient evidence.
However, in its most recent court filing, the SEC continues to target BNB and ten other cryptocurrencies, labeling them as securities. These include Solana (SOL), Cardano (ADA), Polygon (MATIC), Filecoin (FIL), Cosmos (ATOM), The Sandbox (SAND), Decentraland (MANA), Algorand (ALGO), Axie Infinity (AXS) and COTÍ .
The SEC also rejected criticism from the crypto industry, rejecting claims that it is overstepping its authority. In its filing, the agency stated: “The vast and supposedly suffocating assertion of regulatory dominance over an entire industry has not happened, but they complain about that too.”
Industry experts weigh in
Meanwhile, not everyone agrees with the regulator’s methods. Paul Grewal, Coinbase’s chief legal officer, criticized the agency for what he sees as inconsistent enforcement. In a tweet, he disputed why the SEC never classified Ethereum (ETH) and Bitcoin (BTC) as securities.
Ripple legal officer Stuart Alderoty also weighed in and criticized SEC Chairman Gary Gensler, who is leaving his post on January 20, 2025, and President-elect Donald Trump plans to replace him with Paul Atkins, a cryptocurrency advocate. . Alderoty accused Gensler of rushing to submit the final 81-page brief before leaving office. describing how to recycle ‘failed arguments’.
Crypto lawyer John Deaton added his voice: urging the SEC reread Howey’s original decision. He highlighted the ruling’s assertion that it does not matter whether an asset has intrinsic value or whether the enterprise is speculative.
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