Cryptocurrency exchange Binance encountered a setback in its legal battle with the United States securities regulator as a court refused to dismiss most of the claims against it. According to Judge Amy Berman Jackson’s June 28 ruling, allegations pertaining to Binance’s staking program, the sale of BNB following its initial coin offering, and anti-fraud violations will move forward. The judge also upheld claims that former CEO Changpeng “CZ” Zhao acted as a “control person” and that Binance should have registered under the Exchange Act.
However, the Securities and Exchange Commission (SEC) did not prevail entirely, as Judge Jackson dismissed claims concerning secondary market sales of BNB and all transactions involving the Binance USD stablecoin.
Judge Jackson referenced a prior ruling by Judge Analisa Torres in the SEC’s case against Ripple to justify her decision on dismissing the SEC’s claim regarding BNB secondary market sales. The outcome surprised finance lawyer Scott Johnsson, who characterized it as a significant setback for the SEC.
Eleanor Terrett, a reporter from Fox Business, anticipates that legal teams at Coinbase, Kraken, and Consensys will leverage this ruling to strengthen their own litigation strategies.
Judge Jackson also rejected the SEC’s assertions regarding Binance’s “Simple Earn” passive income feature. A court hearing is scheduled for July 9.
The SEC, under the leadership of Gary Gensler, initiated legal action against Binance in June 2023, alleging the exchange offered unregistered securities and operated unlawfully in the U.S. Binance and CZ moved to dismiss the lawsuit approximately three months later, arguing that the SEC overstepped its authority.
Despite these legal challenges, Binance remains the world’s largest cryptocurrency exchange, managing assets worth over $100 billion and serving more than 200 million users.
For more on cryptocurrency exchanges, consider our feature: “Deposit risk: What do crypto exchanges really do with your money?”