Binance and its former CEO Changpeng Zhao have filed a motion to dismiss an amended complaint from the United States Securities and Exchange Commission. The SEC has accused Binance of violating securities laws by selling certain cryptocurrencies. In their motion on Nov. 4, lawyers for Binance argued that the court should dismiss these claims, arguing that the SEC’s case is flawed.
The amended complaint by the SEC targets tokens like Axie Infinity Shards (AXS), Filecoin (FIL), Cosmos (ATOM), The Sandbox (SAND), and Decentraland (MANA). Binance’s legal team argued that secondary market resales of these tokens are not securities transactions.
The case focuses on whether the tokens are sold as part of an “investment contract.” Binance’s lawyers argued that each transaction should be analyzed individually under securities law. The court has already noted that crypto assets are not securities in themselves. The lawyers stated that the SEC’s new complaint fails to follow this reasoning.
One key argument by Binance’s defense is about “blind transactions.” The SEC claimed that Binance’s sale of BNB tokens on Binance and Binance.US exchanges involved buyers who did not know they were purchasing tokens directly from Binance Holdings. Binance argued that this does not make the transactions securities deals.
The SEC has made similar claims in past cases like Ripple’s XRP sales. In July, a judge ruled that certain XRP sales did not break securities law because buyers could not tell if they were buying from Ripple or other sellers.
Binance and Zhao argued that the SEC’s position has no legal basis and requested the court to dismiss the claims. They added that these claims should not be allowed to be amended again.
SEC Lawsuit vs Binance: Crypto Tokens are not Security
The SEC filed its lawsuit against Binance in June 2023. This case has now been ongoing for over a year. It represents a major test of how U.S. law applies to cryptocurrency. The charges have been said to allege Binance as being functioning as unregistered exchanges, broker-dealers, and clearing agencies. Also they have been accused of misrepresenting trading controls and the unregistered offer and sale of securities.
