A federal judge in Manhattan has refused Binance’s bid to move a long-running securities lawsuit into private arbitration, allowing a class action alleging the exchange sold unregistered digital tokens to US investors to continue in court.
Key Takeaways:
- A US judge rejected Binance’s attempt to force arbitration, allowing a class action over alleged unregistered token sales to proceed in court.
- The court found users were not properly notified of the 2019 terms and the arbitration clause could not apply retroactively.
- The ruling moves the case closer to addressing whether some tokens listed on Binance qualify as securities under US law.
In a Thursday opinion, US District Judge Andrew L. Carter Jr. ruled that Binance did not properly notify users when it revised its Terms of Use in February 2019 to include an arbitration clause and a class-action restriction.
The plaintiffs, which are customers from California, Nevada and Texas, opened their accounts between September 2017 and April 2018, before those provisions existed.
Appeals Court Revives Binance Securities Case
The lawsuit is part of a wave of cases filed in April 2020 against crypto exchanges and token issuers during heightened scrutiny of token sales.
A lower court dismissed the complaint in 2022, but the Second Circuit revived it in 2024, concluding that US securities laws could apply to Binance even though the exchange lacked a formal domestic headquarters.
The Supreme Court declined to review that decision in early 2025.
Binance argued its updated 2019 terms governed the relationship with users. Judge Carter disagreed, stating that simply posting revised terms online was insufficient notice.
The court noted that customers had no duty to routinely check whether a company unilaterally altered contractual language.
Even if users later learned of the arbitration clause during the litigation, the court said it could not apply retroactively.
Under California contract law, a unilateral change that does not clearly address earlier claims cannot be used to limit disputes tied to past conduct.
The exchange also failed to enforce its class-action waiver. Although the heading referenced such a waiver, the body of the agreement never defined its scope.
The judge described the language as unclear and interpreted the standardized contract against Binance, which drafted the document.
Plaintiffs previously narrowed the case by dropping claims tied to activity after February 2019, leaving allegations focused on earlier token sales.
The decision clears a major procedural barrier and allows the case to move toward substantive arguments over whether certain listed tokens qualify as securities.
US Senators Urge Probe Into Binance Over Sanctions and AML Concerns
The ruling arrives as Binance faces renewed political scrutiny in Washington. A group of 11 US senators recently asked federal authorities to review whether the exchange complies with sanctions and anti-money-laundering requirements.
Lawmakers cited reports alleging roughly $1.7 billion in digital assets moved through the platform to Iranian-linked entities and raised concerns about possible sanctions evasion through newer payment products.
Separately, Senator Richard Blumenthal launched a congressional inquiry seeking records on the company’s compliance controls.
Binance has rejected the accusations, saying it reports suspicious activity and bars Iranian users from its platform.
The company also disputed media reports that it handled Iran-related transfers and denied claims it dismissed employees who flagged them.
The Securities and Exchange Commission moved to drop its own enforcement action against Binance last year, but the private lawsuit remains active.
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