Leading crypto exchange Binance has filed a motion to dismiss the U.S. Securities and Exchange Commission’s (SEC) amended complaint, which includes new claims targeting specific cryptocurrencies.
On November 4, Binance and its former CEO Changpeng “CZ” Zhao submitted the motion, requesting the court to dismiss the SEC’s revised lawsuit, which has expanded to include digital tokens like Axie Infinity Shards (AXS), Filecoin (FIL), Cosmos’ ATOM, The Sandbox’s SAND, and Decentraland’s MANA.
The SEC’s amended complaint, filed in September, asserts that these tokens should be classified as securities, which would require Binance to register its platform and practices with the SEC. Binance, however, argues that the SEC’s approach lacks clarity. Its legal team contends that crypto assets do not automatically qualify as securities and that each transaction should be assessed individually.
In the latest motion, Binance’s legal team argues that the court correctly rejected the SEC’s initial attempt to conflate crypto assets with investment contracts.
By doing so, the court acknowledged that crypto assets can be sold as part of an investment contract and that each transaction must independently satisfy securities laws.
Binance lawyers allege that the SEC’s amended complaint lip-services to the court’s ruling that “crypto assets are not in and of themselves are securities.”
“The SEC’s amended complaint continues to insist that virtually all transactions involving crypto assets are securities transactions, simply because some buyers might hope the assets will increase in value,” Binance’s motion reads.
The filing highlights that a recent court ruling in the SEC’s case against Ripple Labs supports this stance. In July 2023, U.S. District Judge Analisa Torres determined that Ripple’s XRP sales to institutional investors qualified as securities transactions, but those to retail customers did not. Binance’s lawyers argue that the SEC ignores this precedent, disregarding the difference between sales to institutional and individual buyers.
As per Binance filing, the SEC’s broad classification of all crypto transactions as securities is inconsistent with established case law. Binance also claims that the SEC’s amended complaint fails to provide clear guidelines, leaving crypto market participants unsure of how to comply with regulatory standards.
The SEC’s complaint includes allegations that Binance conducted “blind” transactions where buyers did not know they were purchasing tokens from Binance itself. However, Binance contends that this claim lacks a solid legal basis and has requested dismissal with prejudice, barring further amendments from the SEC.
The motion comes amid Binance’s broader legal challenges in the U.S. In November, the company admitted to violations related to anti-money laundering, unlicensed money transmission, and sanctions compliance, resulting in a $4.3 billion fine. Additionally, Zhao recently completed a four-month prison sentence in the U.S. linked to these charges.
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