Binance CEO Changpeng “CZ” Zhao and his cryptocurrency exchange, Binance Holdings, have filed a joint motion requesting the dismissal of the lawsuit brought against them by the United States Securities and Exchange Commission (SEC). The motion, filed on September 21st in the United States District Court, argues that the SEC has overstepped its authority in the case.
In a 60-page petition, lawyers for Binance and Zhao claim that the SEC failed to provide clear guidelines for the crypto sector before filing the lawsuit, effectively imposing retroactive regulatory authority over the industry. They argue that the SEC is pursuing novel theories of liability for crypto asset sales that occurred before any public guidance was provided by the agency.
“It is clear that the SEC’s lawsuit has no foundation in the currently enacted securities laws,” the petition states. The lawyers also assert that the SEC misinterprets securities laws and their application to crypto assets.
Binance’s American outfit, Binance.US, also filed a separate 56-page motion on the same day, seeking to have the charges against them dismissed. Binance.US, legally known as BAM Trading Services Inc., faces similar allegations of offering the sale of unregistered securities and operating illegally in the United States.
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The SEC initially sued Binance and its affiliates on June 5th, alleging that Binance had engaged in the sale of unregistered securities and operated in violation of US laws. This action by the SEC followed a similar lawsuit filed by the Commodity Futures Trading Commission (CFTC) against Binance for failing to register with the agency and breaking its guidelines.
The ongoing regulatory action against Binance has severely affected trading activity on Binance.US. Daily trading volumes have plummeted more than 98% since September 2022. Binance.US recently laid off 30% of its remaining workforce and saw its president and CEO, Brian Shroder, depart the company.
Binance’s motion to dismiss the SEC lawsuit emphasizes the lack of clear regulatory guidelines in the crypto industry. It argues that imposing liability for actions taken by Binance as far back as July 2017, before any public guidance from the SEC, is unjust and undermines the rule of law. The motion also challenges the SEC’s interpretation of securities laws as they relate to crypto assets. By seeking the dismissal of the lawsuit, Binance and Zhao are asserting their belief that the SEC has overstepped its bounds and acted beyond its statutory authority.
The outcome of this legal battle will have significant implications for both Binance and the broader crypto industry. If the motion to dismiss is successful, it could limit the SEC’s ability to regulate the crypto market retroactively and could set a precedent for other crypto companies facing similar legal challenges. On the other hand, a failure to dismiss the lawsuit could potentially lead to increased regulatory scrutiny and stricter enforcement actions against Binance and other crypto exchanges.
Overall, the joint motion to dismiss the SEC lawsuit highlights the ongoing tension between regulators and the crypto industry. It underscores the need for clear regulatory guidelines and a balanced approach to ensure both investor protection and innovation in the rapidly evolving world of cryptocurrencies. As the legal battle continues, all eyes will be on the court’s decision and its potential impact on the future of crypto regulation in the United States.
