Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia recently ruled that secondary BNB sales and crypto are not securities offerings. This ruling marks a notable victory for Binance.US as several claims from the U.S. Securities and Exchange Commission (SEC) were dismissed, according to Binance’s announcement on July 2, 2024.
Binance stated, “The court found that the SEC did not prove that buyers in secondary market sales obtained BNB with an anticipation of gain, which is necessary for meeting the Howey test criteria.” The Howey test, established by the Supreme Court, is used to decide if a transaction is an investment contract.
Following the collapse of the FTX exchange, the SEC intensified its scrutiny of cryptocurrency exchanges to prevent similar incidents. However, this stringent approach has faced criticism for potentially hindering innovation in the crypto industry.
This decision could positively impact other ongoing legal cases, including the SEC v. Ripple case.
Jackson’s ruling underscored that crypto tokens, in themselves, aren’t securities. Based on the judgment, this means that cryptos do not qualify as investment contracts under the SEC’s jurisdiction.
Binance’s statement added, “The court ruled that the SEC’s strategy muddled the issues and disregarded prevailing Supreme Court precedent. It emphasized that the evaluation should focus on whether the specific conditions of each transaction classify it as a securities transaction.”
This ruling is a relief for many investors. The SEC had previously declared that 68 cryptos were securities, adding BNB and nine other cryptos to the list in June 2023 during its lawsuits against Coinbase and Binance.
The SEC filed lawsuits against Coinbase and Binance, alleging securities violations. The SEC accused Binance and its founder, CZ, of misappropriating billions of clients’ funds. Although there was no evidence of such misappropriation, Binance faced charges for violating antimoney laundering regulations and agreed to pay a $4.3 billion fine, marking one of the highest in criminal history.
The Binance v. SEC case is set for its next court date on July 9, 2024. The American branch of Binance has declared that it is ready for a protracted court-discovery process. The company stated in a post on X dated June 2, “The court concluded on Friday that the SEC’s lawsuit against Binance.US will proceed. We anticipate seeing this case through the legal system because we were ready for it.”
This ruling brings some temporary calm to the crypto industry that has been on edge amid a wave of SEC enforcement action. Entities such as Bit Mining Ltd. (NYSE: BTCM) are likely to feel that the courts could rein in what some stakeholders see as the excesses of the SEC in carrying out its mandate.
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