Binance Files Motion to Dismiss Amended Complaint in SEC Lawsuit

Legal representatives of crypto exchange Binance and former CEO Changpeng Zhao (CZ) have filed a motion to dismiss the US Securities and Exchange Commission’s (SEC) amended complaint in their legal dispute, which has been running for over a year.

The amended complaint, submitted by the SEC last month, reiterated the agency’s stance that “transactions involving crypto assets—including blind secondary market resales of tokens—are securities transactions because some buyers might hope the assets will increase in value.”

Binance Seeks to Dismiss SEC’s Amended Complaint

In response, Binance lawyers argued that the complaint only verbally acknowledged an earlier court ruling, which states that crypto assets themselves are not securities, but refused to accept the logical part of the ruling, which states that the resale of the assets on the secondary market long after they were first distributed by their developers does not constitute a securities transaction.

The filing criticized the agency for lack of regulatory clarity on crypto assets.

“The SEC still refuses to articulate any standard for courts, litigants, or market participants to know which crypto-asset transactions qualify as investment contracts, and which do not,” it stated.

SEC v Binance 

This legal dispute started in June 2023, when the SEC sued Binance and CZ for allegedly selling unregistered securities and operating as an unregistered broker and clearing house in the US.

Like Binance, the SEC has sued several other cryptocurrency firms on claims of securities violations. While the SEC has not set clear rules for operators in the sector, it based its argument that crypto assets qualify as securities if they pass the Howey test criteria. The Howey test determines if a crypto asset transaction qualifies as an investment contract.

Last month, the SEC charged crypto market maker Cumberland DRW for illegally buying and selling crypto assets the agency deemed securities.

A report in September revealed that the SEC imposed a $4.68 billion fine from crypto firms this year, marking a 3018% increase from $150.26 million penalties in 2023.