Credit: Claire Anderson/nft now

Binance and CZ File for Dismissal of SEC Lawsuit

BY Andrew Rossow

September 22, 2023

Binance, its U.S. counterpart Binance.US, and founder Changpeng Zhao (CZ) have filed a Joint Motion to Dismiss in the ongoing securities-violation lawsuit brought against them by the U.S. Securities and Exchange Commission (SEC). 

The initial lawsuit, filed in June, accused Binance of unlawfully listing unregistered securities for U.S. investors, which allegedly included all of its crypto-asset transactions. 

In its Motion to Dismiss, filed on Sept. 21, Binance’s attorneys argued that the SEC has not adequately substantiated the alleged securities-related infractions, and is simply stretching its jurisdiction and power over the digital asset sector without any clarification from Congress. 

Pursuant to the “major questions doctrine,” which Binance’s legal team cited in its legal filings, states that federal agencies, including the SEC, are required to wait for Congressional authority before making decisions that concern major economic or political matters. 

The filing stated that since 2019, Congress has reviewed “more than a dozen proposals” that would provide a coherent and workable framework for crypto assets and trading platforms like Binance –, the effect of which, never conferred exclusive regulatory authority over the entire digital asset sector to the SEC. 

“Despite this, the SEC now seeks to expand its authority and filed this lawsuit, asserting claims against Binance Holdings Limited (‘BHL’) and Changpeng Zhao, among others.”

As it stands, the U.S. Supreme Court (SCOTUS) doctrine maintains a split authority, with some judges believing that Congress should provide clearer guidelines on digital asset regulation, and others believing crypto doesn’t hold enough significance to even invoke the doctrine. 

Binance also argues that the SEC’s broad interpretation of an “investment contract,” under the landmark Howey Test, is another example of the U.S. regulatory watchdog attempting to overreach by expanding the term’s interpretation.

In July, Binance also moved to dismiss the CFTC’s allegations against it, stating that U.S. law only applies domestically and “does not rule the world,” referring back to 15-year-old landmark lawsuit between Microsoft and AT&T back in April 2007. (see: Microsoft Corp v. AT&T Corp., 550 U.S. 437 (2007).

While other countries, including the European Union (EU) and China, are moving at a fairly rapid pace to push forward final drafts of their respective regulatory proposals, the U.S. continues to move at a turtle’s pace as several proposed crypto frameworks remain in the hands of the U.S. House of Representatives – and the SEC fighting against itself to understand its own jurisdiction. 

The future of crypto regulation remains uncertain. While the House Financial Services Committee has moved several crypto-focused bills to the House for voting, their fate in the Senate remains ambiguous.

You can view the recently filed Motion to Dismiss by BAM Management US Holdings and the Joint Motion to Dismiss Complaint by Binance Holdings here. You can also follow the ongoing case of SEC v. Binance Holdings Limited (1:23-cv-01599) here. 

Editor’s note: This article was written by an nft now staff member in collaboration with OpenAI’s GPT-4.

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