SEC vs. Binance: Court rules BNB sales, cryptocurrencies not securities
In a major win for the crypto industry, a federal court ruled that cryptocurrency tokens themselves are not securities.
Cryptocurrencies and secondary sales of the BNB token do not constitute securities, a United States federal court ruled in another significant victory for the crypto industry.
Cryptocurrencies and secondary sales of BNB do not constitute securities offerings, according to Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia.
In a significant win for Binance.US, the judge dismissed several claims made by the U.S. Securities and Exchange Commission, according to a July 2 announcement by Binance:
“The court held that the SEC failed to plead that purchasers in secondary market sales acquired BNB with an expectation of profits, rather than for other uses, which is a key criterion for passing the Howey test (a legal framework outlined by the Supreme Court to determine whether a transaction qualifies as an investment contract).”
The SEC started cracking down on crypto exchanges after the collapse of FTX to avoid a similar meltdown. However, the regulator’s approach has been widely criticized for potentially stifling innovation.
The ruling could have positive implications for other ongoing legal battles, such the SEC vs. Ripple lawsuit.
Cryptocurrencies are not securities
In a major win for the crypto industry, Judge Jackson ruled that cryptocurrency tokens themselves are not securities.
According to the ruling, this means that cryptocurrencies are not investment contracts that fall under the purview of the SEC, according to the announcement:
“The court found that the SEC’s approach muddied the issues and ignored controlling United States Supreme Court precedent. The court also emphasized that the focus should be on whether the circumstances surrounding each transaction render it a securities transaction.”
The judge further ruled that the focus should be on the circumstances of each token sale, not the cryptocurrencies themselves, which are not considered securities.
The ruling comes as a sign of relief for investors. The SEC previously said that 68 cryptocurrencies are securities and added BNB to the list, along with nine other cryptocurrencies, in June 2023 during its lawsuits against Binance and Coinbase.
SEC vs. Binance
In June 2023, the SEC sued Binance and Coinbase for alleged securities violations. In the lawsuit against Binance, the SEC alleged that the company and its founder, Changpeng Zhao, had misappropriated billions of user funds.
Despite no evidence of misappropriation, Binance was charged with violating Anti-Money Laundering laws and settled to pay a $4.3 billion fine, one of the largest criminal fines in history.
The next court hearing for the Binance vs. SEC case is scheduled for July 9.
The U.S. wing of the world’s largest exchange has expressed readiness for an extended period of legal discovery. It said in a June 2 X post:
“On Friday, the Court decided that the SEC’s case against Binance.US will continue. We were prepared for this and look forward to having this case move forward in the judicial process.”