In a bold legal move, Binance CEO Changpeng “CZ” Zhao and the cryptocurrency exchange itself have jointly filed a motion to dismiss the lawsuit brought against them by the United States Securities and Exchange Commission (SEC). This legal battle is currently unfolding in the United States District Court for the District of Columbia.
The heart of the matter revolves around the SEC's claims that Binance offered the sale of unregistered securities and conducted unlawful operations within the United States. However, Binance and CZ Zhao are asserting that the SEC has overstepped its jurisdiction in this lawsuit.
Their detailed 60-page petition argues that the SEC's actions are problematic due to a lack of clear regulatory guidance within the cryptocurrency industry prior to the lawsuit. They contend that the SEC is attempting to retroactively assert its regulatory authority over cryptocurrency transactions, dating back as far as July 2017 when the SEC had yet to provide any public guidance on cryptocurrencies.
The petition states, “The SEC pursues these novel theories retroactively, seeking to impose liability for sales of crypto assets that occurred as far back as July 2017, before the SEC provided any public guidance concerning cryptocurrency. It is clear that the SEC’s lawsuit has no foundation in the currently enacted securities laws.”
Furthermore, Binance’s legal team argues that the SEC has fundamentally misinterpreted securities laws and their applicability to crypto assets, alleging that the regulator has distorted the text of these laws in its pursuit of regulatory control over the crypto industry.
Binance’s American counterpart, Binance.US, has also taken a similar stance in this legal battle by filing a separate 56-page petition on the same day, seeking the dismissal of charges. This concerted effort highlights the seriousness with which Binance and its leadership are approaching this lawsuit.
The ongoing regulatory scrutiny has had a significant impact on Binance.US, with daily trading volumes plummeting by over 98% since September 2022. The exchange also announced layoffs amounting to 30% of its workforce on September 13, with its president and CEO, Brian Shroder, departing from the company amidst these challenges.
As this legal battle unfolds, it is becoming increasingly clear that Binance and CZ Zhao are not backing down without a fight. Their petition to dismiss the SEC's lawsuit asserts that the regulator's actions are not only unjust but also an overreach of its authority.
In a related legal development, the SEC recently faced a setback in its pursuit of immediate access to Binance.US’s software. During a hearing held on September 18, Judge Faruqui, presiding over the case, expressed reluctance to grant immediate access, stating that he was “not inclined to allow the inspection at this time.” This decision represents a partial setback for the SEC in its ongoing case against Binance and its affiliates.
As the Binance v. SEC saga continues, there will no doubt be a large impact on the cryptocurrency industry as a whole, however, it's still far too early to tell how the story will unfold.