In a significant legal victory for the crypto industry, a federal court has ruled that cryptocurrencies and secondary sales of Binance Coin (BNB) do not constitute securities. This ruling, delivered by Judge Amy Berman Jackson, marks a crucial win for Binance.US and the broader crypto community.
Key Points of the Ruling
Judge Jackson’s decision dismissed several claims made by the United States Securities and Exchange Commission (SEC). The court concluded that the SEC failed to prove that purchasers in secondary market sales acquired BNB with an expectation of profits, a critical element of the Howey test. This test, established by the Supreme Court, determines whether a transaction qualifies as an investment contract.
According to a July 2 announcement by Binance, the court highlighted that the SEC’s approach muddied the issues and ignored controlling Supreme Court precedent. The ruling emphasized that the focus should be on the circumstances surrounding each transaction to determine if it constitutes a securities transaction.
Background and Implications
The SEC has been intensifying its scrutiny of crypto exchanges following the collapse of FTX, aiming to prevent similar incidents. However, this approach has faced criticism for potentially stifling innovation within the industry.
This court decision could positively influence other ongoing legal battles, such as the Ripple vs. SEC lawsuit. The SEC had previously classified 68 cryptocurrencies, including Binance’s BNB coin and nine others, as securities in June 2023 during its lawsuits against Binance and Coinbase.
Also Read: Former Binance CEO ‘CZ’ Holds 64% of BNB Supply
Details of the Binance vs. SEC Case
In June 2023, the SEC sued Binance and Coinbase for alleged securities violations, accusing Binance and its founder, Changpeng Zhao, of misappropriating billions of user funds. Despite no evidence of user fund misappropriation, Binance was charged with violating Anti-Money Laundering laws and agreed to pay a $4.3 billion fine, one of the largest criminal fines in history.
The next court hearing for the Binance.US vs. SEC case is scheduled for July 9. Binance.US has expressed its readiness for an extended period of legal discovery, stating in a June 2 X post: “On Friday, the Court decided that the SEC’s case against Binance.US will continue. We were prepared for this and look forward to having this case move forward in the judicial process.”
