I hope you are all well and had an excellent week, welcome to CryptoGod-1’s blog on all things crypto. In this post I will be looking at the recent filing by the SEC where they are looking to dismiss Binance's arguments against their lawsuit due to a lack of merit behind their defence.
SEC Opposes Binance's Argument
The United States Securities and Exchange Commission (SEC) has made a new court filing as of the 8th of November 2023 in which they oppose the arguments of BINANCE to have their lawsuit against the exchange dismissed. The SEC added that the exchange's motion has no real basis under law. The securities regulator went on to claim the defendants applied the law incorrectly in an attempt to evade the charges. They also added that in the United States no court has been bound by the incorrect legal argument terming it a “tortured interpretation of the law.
Back in June 2023 the Commission filed charges against Binance for allegedly blatantly disregarding the federal securities law by offering trading services to unregistered securities, and asset commingling amongst others. Binance were not alone, as similar charges were also filed against COINBASE a day later. Both exchanges have promised to defend their actions vigorously and seek proper crypto regulations from courts.
The financial regulator went on to stress its position by noting that Binance should not aim to avoid responsibility for its actions by misinterpreting the known legal foundations of the justice system. They noted how the motion relies on "distorted" and "tortured" interpretations of both federal law and precedents.
“Defendants now seek to avoid the repercussions of their actions by asking this Court to dismantle decades of foundational precedent upon which the nation’s securities laws operate. In its place, Defendants would install a rigid framework that turns entirely on contract law and the form transactions take, in clear contravention of Congress’ broad, flexible regime…”
The Commission noted that the actions of Binance had breached the law and requirement set out in the Howey Test and its progeny. They went on to state that both the Binance and Binance.US platforms had offered crypto assets to the public while about 12 of these digital assets and three investment programs that were on offer fitted the description of investment contracts. It was also claimed that the initial coin offering of BNB and its staking and yield programs were in violation of the as the SEC urged the federal judge to deny Binance’s motion to dismiss the lawsuit.
Binance.US and Binance founder Changpeng "CZ" Zhao hit back at the SEC as he noted the Commission was overstretching their reach and the company had not breached any existing laws. They also argued the SEC did not “plausibly allege” various securities law violations. The SEC had argued that Binance were looking to ignore time-tested principles and instead claimed that Binance wished to introduce a “rigid framework” that has not been accepted by any U.S. court.
Binance have denied doing such a thing, and instead took a route several crypto firms have cited when dealing with the actions of the SEC. The "Major Questions Doctrine" is a recent Supreme Court ruling that's became a favourite of crypto companies facing litigation from the federal regulator. The cryptocurrency exchange noted that the regulator has no Congressional right to regulate the cryptocurrency industry via this doctrine. The regulatory body rebuffed this claim as being part of Binance’s “theatrics” to justify their securities law violation.
“The SEC recently brought several enforcement actions – including this action – premised on its new position that virtually all crypto assets, and virtually all crypto-asset transactions, are securities.”
The SEC hit back by noting:
"Defendants fail to explain why a doctrine intended to protect Congressional authority to make major policy decisions would be served by precluding the SEC from enforcing the Congressional policy choices embodied in the securities laws."
Finally the SEC also noted how Binance is seeking to insert new requirements into the famous “Howey Test." The agency has made use of this test to bring enforcement against companies for several decades and they feel Binance’s proposition violates the contractual principles of the Howey Test. They highlighted Binance's claim that an asset or offering that constitutes a security must include a “forward-looking contract” and that investments must flow “into the relevant common enterprise.”
The court will now review the SEC’s latest filing while deciding whether to accept Binance’s earlier request to dismiss the case. A decision in the regulator’s favour will be seen as crucial for the SEC to pursue the case, along with others, and it would also prove that it has sufficient claims for its litigation against Binance.
Have a great day,
CryptoGod-1.
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