all41author Binance faced off with the SEC in Washington, DC Monday in an effort to toss the case the securities regulator bought last summer
Grey82/Shutterstock modified by Blockworks
share
The US Securities and Exchange Commission is once again looking to a federal judge to back up its stance of having authority over the crypto industry.
In a four-hour hearing Monday, Binance squared off with the SEC in Washington DC in an effort to dismiss charges brought against the exchange, its US arm and former CEO Changpeng Zhao last summer.
Judge Amy Berman Jackson immediately expressed doubt that Binance had a leg to stand on. She started by questioning counsel how they could possibly argue that the SEC has no right to apply securities laws to crypto when the law itself was designed to apply to financial instruments that did not yet exist when it was written.
Read more: Binance and Changpeng ‘CZ’ Zhao face multiple SEC charges
“How do I score the arguments that you’re making regarding not using an ill fitting, big mechanism like an investment contract to embark on the regulation of this whole new industry without a clear congressional mandate with the case law that says over and over and over again that it was designed to be…flexible, designed to protect the investing public?” she asked Binance Holdings Limited attorney Jason Mendro.
“I do agree that they say that the securities laws are intended to be broad,” Mendro responded. “I’m not disputing that. But the statute has another purpose other than to be broad,” adding that there must be limiting factors, or else real estate could be a security.
The SEC filed 13 charges against Binance back in June 2023, alleging the exchange offered and sold unregistered securities through their BNB and BUSD tokens alongside other coins listed on their platforms. The SEC also claims the exchange commingled client assets.
Jackson appeared to grow frustrated with Binance’s team, at one point asking them to stop repeating their argument that investment contracts can only exist with an actual contract.
“We’re going to be wasting a lot of time If we comb through the Howey factors with respect to each asset that’s been alleged,” she said.
Jackson also noted that she had doubts Binance’s team was even interpreting the Howey test investment contract definition correctly.
“I don’t think that is what it says,” she told Mendro at one point.
Monday’s hearing comes after the SEC faced off against Coinbase last week in Manhattan during a similar hearing to dismiss charges. The SEC announced its suit against Coinbase one day after it sued Binance.
Both Coinbase and Binance’s defense teams made an appeal to invoke the major questions doctrine. This states that courts will not interpret congressional law as allowing agencies to rule on issues of “major” political or economic significance.
Read more: US judge questions SEC limits during Coinbase hearing
“Given the sweeping nature of the SEC’s statutory arguments, far more is at stake here than even the enormous impact on the crypto market,” Binance wrote in its motion to dismiss.
Jackson acknowledged Monday that this case has implications for the crypto industry as a whole. However, she is still “not inclined to think” the major questions doctrine applies in this case.
In Coinbase’s case, Southern District of New York judge Katherine Polk Failla also expressed doubt that the doctrine could apply. She noted that she did not want to overstep and “take power I don’t have, to stop something I shouldn’t.”
Read more: Binance says the SEC can’t use DOJ plea deals as proof of guilt
Binance’s hearing comes about six weeks after the exchange and Zhao entered into a plea agreement. This agreement, involving the US Department of Justice, the Commodity Futures Trading Commission, and the Department of Treasury, includes a combined financial penalty of $4.3 billion. Zhao is scheduled to be sentenced later this month.
Judge Failla is expected to decide whether or not to dismiss the SEC’s case against Coinbase in the coming weeks or months.
Don’t miss the next big story – join our free daily newsletter.
Newsletter
Blockworks Daily
Upcoming Events
Digital Asset Summit 2024
Mon – Wed, March 18 – 20, 2024
Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.
Permissionless III
WED – FRI, OCTOBER 9 – 11, 2024
Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]
recent research
Research
In this report, each analyst on the Blockworks Research team lays out their highest conviction thesis for 2024.
by Sam Martin
/
Breaking headlines across our core coverage categories.
Finance
Crypto fund trading volumes amounted to $11.8 billion last week — roughly seven times the weekly average in 2023, according to CoinShares
Policy
The company called the filing a “strategic step” ahead of its trial
Markets
Spot ETFs were anticlimactic for bitcoin’s price but ether holders likely aren’t complaining
Web3
Plus, a game that creates 3D versions of NFTs and Pudgy Penguins’ price floor hits an all-time high
Business
Elsewhere, Axie Infinity’s developer gets its first CEO and 1inch DAO lawyers up
Business
Plus, a car data monetization platform scores $11.5 million and liquid restaking sees dry powder
newsletter
Blockworks Daily Newsletter
Get the daily newsletter that helps thousands of investors understand the markets.
blockworks research
Unlock crypto's most powerful research platform.
Our research packs a punch and gives you actionable takeaways for each topic.
Blockworks Inc.
133 W 19th St., New York, NY 10011
