On the 22nd, the cryptocurrency exchange Binance had its first hearing with the U.S. Securities and Exchange Commission (SEC) at the Federal District Court for the District of Columbia in the United States. Binance sought to dismiss the SEC’s lawsuit, and both parties argued whether cryptocurrencies should fall under the SEC’s regulatory jurisdiction. However, the judge did not make a final decision.
Background:
SEC plans to win the lawsuit against Binance and Coinbase using the “LUNA case”! Accuses BUSD and UST of being securities.
In November of last year, Binance reached a settlement agreement with the U.S. Department of Justice, the Commodity Futures Trading Commission (CFTC), the Office of Foreign Assets Control (OFAC), and the Financial Crimes Enforcement Network (FinCEN). They pleaded guilty and agreed to pay a $4.3 billion fine, but the lawsuit with the U.S. Securities and Exchange Commission (SEC) is still ongoing.
In June of last year, the SEC filed a lawsuit against Binance Holdings (Binance’s parent company), Changpeng Zhao, and Binance US, among others, bringing forth 13 charges accusing the defendants of operating an unregistered exchange, illegally providing and selling securities to U.S. investors, mishandling customer funds, and more.
Debate over regulatory scope:
According to Blockworks’ report, Binance and the SEC had a four-hour hearing on the 22nd at the Federal District Court for the District of Columbia. Binance attempted to dismiss the SEC’s allegations, and Judge Amy Berman Jackson questioned Binance’s position, asking the Binance lawyer how they believed the SEC lacked the authority to apply securities laws to cryptocurrencies.
The Binance lawyer responded by agreeing with the SEC’s statement that securities laws have a broad definition. However, he emphasized that securities laws must have limiting factors, otherwise real estate could become a security.
During the hearing, Amy Berman Jackson seemed increasingly disappointed with the Binance team and even asked Binance to stop repeating their argument that investment contracts can only apply to signed actual contracts. She stated that it would be a waste of time to go through each alleged asset to determine if they meet the Howey Test criteria, and she doubted that Binance had correctly explained the definition of an investment contract under the Howey Test.
Binance hopes to invoke the “significant questions” doctrine:
Last week, another exchange, Coinbase, also had a hearing at the Southern District of New York Federal Court to seek dismissal of the SEC lawsuit. Like Binance, Coinbase also invoked the “significant questions” doctrine, which states that an institution needs explicit congressional direction to issue rules with significant economic or political impacts.
Binance argued in its motion to dismiss that the SEC’s arguments were broad and would have a significant impact on the cryptocurrency market. Amy Berman Jackson admitted that this case has an impact on the entire cryptocurrency industry, but she was inclined not to consider this case under the significant questions doctrine. Her stance is similar to the judge in the SEC v. Coinbase case, and she has not yet decided whether to dismiss this case.
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