Binance Accused by SEC of Breaching Securities Laws in Latest Amended Complaint

SEC Intensifies Legal Battle Against Binance and CEO Changpeng Zhao

The US Securities and Exchange Commission (SEC) is ramping up its legal efforts against Binance and its former CEO, Changpeng Zhao, challenging their operations as an unregistered securities exchange.

This development follows an amended suit filed by the SEC, in which it expands on its accusations that Binance and Binance.US facilitated the sale of ten cryptocurrencies on the secondary market through their platform, using the Binance Coin (BNB) as an intermediary.

The SEC's Response to the Dismissal Motion

On 4 November 2024, Binance and Zhao filed a motion to have the SEC’s amended complaint dismissed.

In response, the SEC issued a detailed Memorandum of Law, defending its case and rejecting the claims made by Binance.

The SEC argues that its allegations are sufficiently grounded in facts that meet the criteria established by the Howey test—an essential framework used by the US Supreme Court in 1946 to determine whether a transaction involves a security.

The SEC’s memorandum not only addresses the specifics of the Howey test but also reiterates its stance on the legality of Binance’s practices.

The commission believes that the exchange's operations, particularly the sale of secondary market cryptocurrencies like Solana (SOL), Cardano (ADA), and others, qualify as securities offerings.

Binance’s Discontent with SEC Oversight

In its filing, the SEC also responded to Binance and Zhao's criticism of the regulator’s stance on cryptocurrency.

The agency seemed to take a direct jab at the exchanges’ complaints regarding the extent of regulatory control, stating,

“The foretold vast and purported suffocating assertion of regulatory dominion over an entire industry has not occurred, but they complain about that, too.”

This comment highlights the ongoing tension between the cryptocurrency industry and regulatory bodies, with some accusing the SEC of stifling innovation through overreach.

A Lengthy and Complex Legal Process

This is not the first time the SEC has raised concerns about Binance’s operations.

The initial complaint was filed on 5 June 2023, accusing the exchange of facilitating the sale of unregistered securities.

The cryptocurrencies in question—Solana, Cardano, Polygon (MATIC), Filecoin (FIL), Cosmos (ATOM), and others—have become central to the SEC's claims that Binance is operating as an unregistered exchange.

The SEC’s lawsuit is part of a broader crackdown on the cryptocurrency industry, which has seen the agency file similar claims against other exchanges, such as Coinbase, in June 2023.

As of mid-2023, the SEC has alleged that 68 cryptocurrencies qualify as securities, leading to a growing number of legal disputes between the commission and major players in the digital asset market.

The Industry Under Scrutiny

The SEC’s actions against Binance reflect an intensifying global push to regulate cryptocurrency markets more tightly.

As the case proceeds, the spotlight will remain on how the SEC addresses the role of major exchanges in the buying and selling of digital assets.

The ongoing litigation, combined with the SEC's broadening scope of investigations, suggests a crucial moment for cryptocurrency regulation in the United States.

As the legal battle unfolds, it remains to be seen how it will impact the broader landscape of cryptocurrency regulation and whether further changes in the regulatory environment will follow.