The U.S. Securities and Exchange Commission (SEC) has refuted Binance's motion to dismiss the SEC's lawsuit, contending that Binance's arguments lack legal foundation and rely on incorrect legal analysis. Binance, including its U.S. arm Binance.US and founder Changpeng Zhao, faced the SEC's legal action in June, accused of selling unregistered securities and operating without proper registration as an exchange in the United States. In response, Binance claimed the SEC misinterpreted securities laws and extended its authority beyond the appropriate scope, citing the absence of cryptocurrency guidance.
In the latest court filing on November 7, the SEC rejected Binance's dismissal request, emphasizing that Binance had deliberately chosen not to comply with federal securities laws. The SEC pointed to a statement by Binance's chief compliance officer admitting that the exchange "operates as an unlicensed stock exchange in the United States." The regulator dismissed Binance's analogy of cryptocurrencies to supermarket items like oranges, asserting that Binance's cryptocurrency sales constitute investment contracts under the Howey test.
Addressing Binance's argument that the lawsuit violated the substantial question doctrine, a principle established by a 2022 U.S. Supreme Court ruling, the SEC contended that granting Binance's dismissal request would overturn decades of fundamental precedent in state securities laws. The SEC asserted that such a move would replace the current "broad, flexible regime" with a "strict framework." Furthermore, the SEC reiterated its claims that Binance's various offerings, including Binance USD (BUSD), Initial Coin Offerings (ICOs), the Earnings Pledge, Vault, and Earn programs, are all investment contracts violating securities laws.
The legal battle between Binance and the SEC underscores the broader regulatory scrutiny faced by cryptocurrency exchanges, particularly regarding compliance with securities laws. The outcome of this case may have significant implications for the regulatory landscape surrounding digital assets in the United States.
