n a Friday court order, Judge Amy Berman Jackson of the District Court for the District of Columbia ruled on motions to dismiss aspects of the SEC's lawsuit against major crypto exchange Binance and its founder Changpeng "CZ" Zhao. The SEC had filed a lawsuit against Binance, Binance.US and CZ last summer alleging the entities operated as unregistered broker-dealers and offered unregistered digital asset securities to US customers.
Judge Jackson dismissed the SEC's claims specifically related to secondary market sales of Binance Coin (BNB) and transactions on Binance's former "Simple Earn" staking products. However, she allowed the majority of the SEC's charges to move forward, including claims about the initial coin offering for BNB, ongoing BNB sales, Binance's staking offerings, and allegations that Binance and CZ conducted broker-dealer activities and committed securities fraud without registering with the SEC.
SEC Allegations on Broker Activity Can Proceed
In particular, the judge's ruling means the SEC can continue pursuing its central allegation - that Binance operated as an unregistered cryptocurrency exchange and broker-dealer facilitating trading in digital asset securities. While acknowledging these types of enforcements involve "novel issues at the frontier of legal issues", Judge Jackson wrote that the SEC had plausibly demonstrated how Binance may have met the definition of a broker requiring registration under the Securities Act.
She rejected arguments from Binance's legal team that the SEC overstepped its authority or that securities laws could not apply to cryptocurrency activities, noting courts had consistently found the SEC had jurisdiction over digital assets deemed investment contracts and the transactions surrounding them. Allowing these core enforcement claims to move ahead means significant questions still loom over Binance's history of operating what may have been an unregistered trading venue in the US.
Implications for Binance's US Operations
Though providing partial relief, the dismissal of some ancillary charges does not resolve the overarching issue of whether Binance violated securities laws. CZ is also still facing prison time from unrelated sanctions and anti-money laundering charges brought by US prosecutors. As such, the ruling adds further ambiguity rather than clarity about Binance's ability to return to operating in the US and what long-term remedies may be required from regulators.
Binance scaled back its US-facing operations in 2020 amid regulatory headwinds but some market observers still see issues blocking a potential restart or expansion. If ultimately found liable, Binance could potentially face sizable financial penalties and even a ban on re-entering the US crypto market. At the same time, the judge did differentiate digital assets from any investment contracts claimed around specific offerings like BNB. So a trial outcome is difficult to foresee and could still go either way for Binance.
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