Judge Dismisses SEC Claims Against Binance, Cites Lack of Clarity in Crypto Securities Classification

You win some, you lose some – that’s all too familiar to crypto-execs, just ask Ripple’s Brad Garlinghouse. Despite achieving some victories against the US Securities and Exchange Commission (SEC), the CEO and Ripple also incurred some unfortunate losses. One such win is the decision that XRP sold to individuals on exchanges is not classified as security.

Related: Supreme Court Ends Chevron Deference, Deals Blow to SEC’s ‘Crypto by Enforcement’ Strategy

It is that exact fact that is now helpful to Binance in its struggle with the SEC. Yet, it’s not all roses and sunshine, as Judge Amy Berman Jackson of the US District Court for the District of Columbia just allowed the majority of SEC claims against the exchange.

SEC Sues Binance After DOJ, CFTC Settlement

In the suit the SEC alleges that Binance artificially inflated its trading volumes, misused customer funds, failed to limit access for US customers to the exchange and that it misled “investors about its market surveillance controls”.

Further, the SEC claims Binance illegally enabled the trading of several crypto tokens that the SEC considers unregistered securities.

This follows Binance’s November 2023 settlement with the DOJ and CFTC, where it agreed to pay US$4.3 billion (AU$6.45 billion) over illicit finance breaches.

So, what’s the good news for Binance?

According to MetaLawMan, a web3 and crypto lawyer, the judge’s reliance on the Ripple case reasoning led to the dismissal of the SEC’s claims regarding secondary market sales. This indicates that the court does not find sufficient grounds to treat these transactions as securities under the Howey test.

The judge also criticised the SEC’s lack of a clear principle to differentiate between tokens that are considered securities and those that aren’t – something many in the industry have long lamented. 

MetaLawMan said this could push for clearer regulatory guidelines, benefiting Binance and the broader crypto industry by reducing ambiguity and potential legal challenges.

Related: ATO Cracks Down: Crypto Profits Under Scrutiny as Aussies Lodge Tax Returns

Additionally, a recent Supreme Court decision could help Binance and other crypto companies to more effectively challenge the SEC’s regulatory overreach. The recent end to the Chevron deference means it’s no longer up to the SEC to define the “rules of the road” as SEC Chair Gary Gensler likes to call it.