U.S. Judge Allows Major Portion of SEC Lawsuit Against Binance and CZ to Proceed

In a significant legal development, U.S. District Court Judge Amy Berman Jackson ruled that most of the U.S. Securities and Exchange Commission’s (SEC) lawsuit against crypto exchange Binance and its founder, Changpeng Zhao (commonly known as “CZ”), can proceed. While some charges were dismissed, others—including those related to the initial coin offering (ICO), ongoing sales for BNB, BNB Vault, staking services, failure to register, and fraud—will move forward.

The SEC’s Allegations

The SEC filed the lawsuit last summer, alleging that Binance and Binance.US were offering unregistered broker, trading, and clearing services for unregistered digital asset securities in the U.S. The case specifically focuses on Binance’s handling of BNB tokens and related services. Judge Jackson found that the SEC’s claims under most of the charges were plausible, emphasizing the distinction between investment contracts and the tokens themselves.

Economic Reality and Securities Law

Judge Jackson’s ruling builds upon previous decisions in the crypto industry. She cited Judge Analisa Torres’ 2023 ruling in the SEC’s case against Ripple Labs, emphasizing the importance of considering the economic reality of token transactions when applying securities law. Additionally, she rejected arguments that the SEC lacks authority to enforce regulations in the crypto space, reinforcing the agency’s ability to address significant industries.

As the legal battle continues, Binance and CZ face ongoing scrutiny, with implications for the broader crypto ecosystem. The court’s decision underscores the need for clarity and compliance within the rapidly evolving digital asset landscape.