Federal Judge Calls for Review on Crypto as Securities in Binance-SEC Case
Summary:
U.S. Federal Judge Amy Berman Jackson, directing the SEC's lawsuit against Binance, its U.S. arm, and ex-CEO Changpeng Zhao, calls for a court review on the classification of digital assets as securities. She intends to examine the SEC's handling of cryptocurrencies under existing legal directives, with defenses provided the opportunity to debate the permanent security status of digital assets and the notion of staking as a security. In relation to Binance's ongoing case, it appears the status of tokens such as Binance Coin (BNB) and Binance USD (BUSD) will need to be addressed. The timing for presenting arguments is not clear, and the SEC's classification of digital tokens as securities remains a contentious issue in several suits.
Amy Berman Jackson, a U.S. federal judge presiding over the lawsuit brought by the Securities and Exchange Commission (SEC) against cryptocurrency exchange Binance, its U.S. subsidiary, and former CEO Changpeng Zhao, has mandated a judicial examination concerning the status of digital currencies as securities. On January 18th, through a court order issued in the District of Columbia, Judge Berman Jackson stated her intent to evaluate the SEC's approach towards regulating cryptocurrencies under existing legal procedures. Binance.US's legal team will have the opportunity to discuss the permanent security status of digital assets and the SEC's contention that staking could be deemed a security.
Judge Berman Jackson enunciated her intent to evaluate whether an investment contract necessitates a contractual commitment and whether the SEC misconstrued the term "scheme" according to the Howey test. She also mentioned that, although both defenses tackle major doctrinal questions and pose queries about the suitability of litigation as a mechanism for the SEC's oversight of the crypto sector, one lawyer should be assigned to argue this one issue for the defense.
The SEC has traditionally used the Howey test to ascertain whether an asset is a security by fulfilling the requirements of an investment contract. Judge Jackson has brought up this issue, implying that it may be relevant to Binance's ongoing case involving tokens, such as Binance Coin (BNB) and Binance USD (BUSD). The timeline for the arguments presentation remains uncertain.
In a number of its lawsuits against crypto firms operating in the U.S., the SEC has argued the majority of tokens meet the criteria of securities, thus subjecting them to the commission's regulatory authority, overstepping the Commodity Futures Trading Commission. A judge ruling in the SEC's case against Ripple in July 2023 determined the XRP token was not a security in the context of automated sales on crypto exchanges.
Subsequent to the Ripple adjudication, Coinbase's attorneys used it as a precedent in their motion to dismiss the SEC's lawsuit in August 2023. On the other hand, the SEC has challenged this in other cases, arguing in its legal action against Terraform Labs and Do Kwon that whether certain tokens were securities was a matter for the court to settle legally, not for the jury to determine factually.
Published At
1/18/2024 10:59:17 PM
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