Binance, Binance.US, and Changpeng Zhao have jointly filed a motion to dismiss a lawsuit brought by the United States Securities and Exchange Commission (SEC).
In their 60-page petition submitted on September 21, their legal team contends that the SEC exceeded its regulatory jurisdiction by filing the lawsuit against them.
The defendants argue that the SEC failed to provide clear guidelines for the cryptocurrency sector before taking legal action, effectively imposing its authority retroactively.
The SEC’s lawsuit accuses Binance, Zhao, and Binance.US of listing unregistered securities in the form of various cryptocurrencies for trading and investment by U.S. investors.
This legal battle has prompted a dispute over the accessibility of Binance.US customer funds.
Binance Claims SEC has Expanded Definition of “Investment Contract”
One of the key arguments presented in the motion to dismiss is that the SEC has expanded its definition of “investment contract” to encompass a wide range of crypto assets and transactions.
The legal team for Binance and Zhao asserts that the SEC’s interpretation of securities laws and their application to cryptocurrencies is fundamentally flawed.
The motion emphasizes that the SEC’s lawsuit seeks to hold Binance and its affiliates accountable for crypto asset sales dating as far back as July 2017, despite the absence of clear regulatory guidance on cryptocurrencies at that time.
The petition suggests that the SEC’s lawsuit lacks a solid foundation within existing securities laws.
SEC is Overreaching to Regulate Crypto
Both Binance and Zhao contend that Congress has considered numerous proposals since 2019 to establish a comprehensive framework for cryptocurrencies and their trading platforms.
None of these proposals would grant exclusive regulatory authority over the crypto industry to the SEC.
Consequently, they argue that the SEC is overreaching in its pursuit of regulatory control over the crypto sector.
In a separate 56-page filing on the same day, Binance.US, legally known as BAM Trading Services Inc., also moved to have the charges against it dismissed.
The legal action taken by the SEC against Binance and its affiliates followed a similar lawsuit by the Commodity Futures Trading Commission (CFTC) that accused Binance of operating illegally in the United States and failing to register with the CFTC.
The ongoing regulatory actions against Binance, including the SEC lawsuit, have had a substantial impact on trading activity on Binance.US. Daily trading volumes on the platform have plummeted by over 98% since September 2022. In response to these challenges, Binance.US laid off 30% of its remaining workforce and saw its president and CEO, Brian Shroder, depart the company.
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