The crypto exchange Binance accuses the SEC of not having the necessary requirements for the lawsuit.

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The crypto exchange Binance still maintains that the SEC’s lawsuit is unfounded and criticizes the latest documents released by the regulatory authority.

Binance challenges the legal legitimacy of the SEC: the crypto exchange asserts that it has not satisfied the Howey test in the ongoing lawsuit 

Binance, together with its US counterpart Binance.US and founder Changpeng Zhao, has responded to the filing by the U.S. Securities and Exchange Commission (SEC), vehemently contesting the regulator’s allegations.

The core of Binance’s argument revolves around the claim that the SEC did not meet the stringent requirements of the “Howey test” in the lawsuit.

The SEC filed a lawsuit in June, accusing Binance and Binance.US of allowing the trading of unregistered securities by quoting specific cryptocurrencies and providing a staking service to the general public. 

In particular, Binance has recently resolved the accusations with various regulatory bodies. Among these are the United States Department of Justice, the Commodity Futures Trading Commission, the Office of Foreign Asset Control, and the Financial Crimes Enforcement Network.

In their response, filed on Tuesday, Binance, Binance.US, and Changpeng Zhao argue that the SEC has not demonstrated that the US customers of the exchanges have entered into contracts that meet the definition of “investment contract”. 

The depositories have also contested the SEC’s claim that the obligations towards the exchange users were insufficient, thus casting doubt on the existence of an investment contract as envisaged by the Howey test.

The legal team of Binance has also rejected the SEC’s interpretation of the recent agreements with the US Department of Justice and other regulatory bodies.

The details of the story

The SEC had argued that these agreements indicated Binance’s awareness of operating in the United States and serving US customers. However, Binance countered by emphasizing that the agreements were specific to charges unrelated to securities laws.

In a separate document, Binance argued that securities laws should not be applied similarly to the Bank Secrecy Act or the International Emergency Economic Powers Act, both mentioned in the agreements. 

The exchange and Zhao have stated that jurisdiction admissions under the Bank Secrecy Act do not extend to the SEC’s requests.

Binance has emphasized that violations of the Bank Secrecy Act do not necessarily imply acceptance of the SEC’s theory that the cryptocurrency assets in question are securities under the Securities Act or the Exchange Act.

During the legal proceedings, Binance remains firm in contesting the SEC’s legal position, emphasizing in particular the importance of meeting the rigorous criteria outlined in the Howey Test to establish the existence of an investment contract. 

The outcome of this legal battle could significantly shape the regulatory landscape of cryptocurrency exchanges in the United States.

The efforts of the SEC and the future of the crypto exchange Binance

The exchange’s efforts to reject the demand go beyond refuting the SEC’s main arguments. 

Binance navigates skillfully in the legal terrain, distinguishing between agreements related to charges brought by other regulatory bodies. But above all, the specific claims of the SEC based on securities laws.

The exchange argues that the Bank Secrecy Act violations, mentioned in the recent settlements, do not inherently involve securities laws, and therefore the SEC’s charges should be treated separately.

In addition, Binance’s legal team emphasizes that the agreements and consent order should not be interpreted as admissions of guilt regarding violations of securities laws.

The blurred approach seeks to protect Binance from the SEC’s attempts to draw parallels between regulatory violations in different areas.

With a significant departure from conventional legal rhetoric, Binance challenges the SEC’s attempt to expand the application of securities laws. The filing argues that laws such as the Bank Secrecy Act do not inherently extend the scope of the SEC’s requests. This move signals a strategic delimitation of jurisdictional boundaries.

Conclusions on the matter

In conclusion, the ongoing legal battle between Binance and the SEC represents a crucial moment in the evolution of cryptocurrency regulations.

The meticulous defense of Binance, focused on the rigorous criteria of the “Howey test”, reflects the exchange’s commitment to contest the SEC’s accusations at their legal core.

As this legal battle unfolds, industry observers anxiously await the court’s verdict. They recognize the potential ramifications for the broader cryptocurrency landscape.

The strenuous defense of Binance, based on technical legal arguments and a meticulous examination of the SEC’s claims, highlights the high stakes involved in the confrontation between regulatory authorities and cryptocurrency platforms.

The outcome of this legal battle will undoubtedly shape the regulatory framework for cryptocurrency exchanges operating in the United States. The ruling will set precedents on how regulatory bodies can exercise authority over this rapidly evolving sector.

The challenge by Binance to the SEC’s legal position highlights the intricate interaction between regulatory control and the complexities inherent in the definition and regulation of digital assets in a global financial landscape.