- Binance, Binance.US, and CZ Zhao file motions to dismiss SEC lawsuit.
- Dispute centers around SEC’s broad interpretation of crypto assets as securities.
- Debate over the “major questions doctrine” and Congress’s role in crypto regulation.
Binance, its U.S. affiliate Binance.US, and their CEO Changpeng ‘CZ’ Zhao have submitted motions seeking the dismissal of the lawsuit filed by the Securities and Exchange Commission (SEC). In their filings on Thursday, they argued that the SEC had failed to make a plausible case for various alleged securities violations. Additionally, they contended that the SEC was attempting to extend its authority over digital assets without explicit legislative backing from Congress.
The SEC had initiated legal action against Binance, Changpeng Zhao, and Binance.US in June, accusing them of unlawfully listing unregistered securities in the form of various cryptocurrencies, which were made available for trading and investment by U.S. investors. This lawsuit triggered a legal battle concerning the accessibility of Binance.US customer funds.
Attorneys representing Binance and Binance.US asserted that the SEC was overstepping its bounds by alleging violations of securities laws. One of the filings pointed out that the SEC had recently launched multiple enforcement actions, including this one, based on its newfound stance that nearly all crypto assets and transactions should be classified as securities. They argued that the SEC’s interpretation of the term “investment contract” was overly broad.
Both filings also invoked the “major questions doctrine,” a precedent set by the Supreme Court, which directs federal agencies to defer to Congressional authority when it comes to significant economic or political matters.
The filings emphasized that Congress had been actively considering over a dozen proposals since 2019 to establish a coherent regulatory framework for crypto assets and their trading platforms. Crucially, none of these proposals sought to grant the SEC exclusive regulatory jurisdiction over the crypto industry. Despite this, the SEC had expanded its authority and initiated legal proceedings against Binance Holdings Limited (‘BHL’) and Changpeng Zhao, among others.
This argument has caused division in the courts, with some judges suggesting that Congress should clarify the regulatory treatment of digital assets, while others argue that cryptocurrencies do not hold sufficient significance to trigger the major questions doctrine. Although the House Financial Services Committee has advanced several crypto-specific bills to the full House for voting, it remains uncertain whether these bills will progress through the Senate.
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