30s Summary

Binance and former CEO Changpeng “CZ” Zhao are pushing to dismiss a lawsuit by the SEC. Their main argument is the SEC’s lack of clear guidelines on when crypto transactions amount to investment contracts. Binance contends the SEC’s stance contradicts a previous court decision stating cryptocurrencies are not securities. The SEC had initially suggested Ether transactions are investment contracts, before dropping this claim. Binance and Zhao are also dealing with criminal charges from the Department of Justice; in 2023, the company was fined $4.3 billion for violations, including anti-money laundering.

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Binance and its former CEO, Changpeng “CZ” Zhao, have recently attempted a new push to dismiss a lawsuit brought against them by the Securities and Exchange Commission (SEC). Lawyers for the parties submitted the motion to dismiss the lawsuit on Nov. 4. The motion specifically targets an earlier amended complaint by the SEC.

The main dispute from Binance and Zhao lies in the SEC’s refusal to establish a guideline for determining when cryptocurrency transactions are considered as investment contracts. They have called this a lack of clarity in the SEC’s regulations pertaining to virtual assets.

The motion to dismiss contends that the SEC’s amended complaint doesn’t agree with an earlier court decision that stated cryptocurrencies are not securities in themselves. It insists that virtually all cryptocurrency transactions, including secondary market resales of tokens, are securities transactions simply because some buyers might hope the value of these assets will increase.

The motion continued to criticize the SEC for selecting winners and losers haphazardly. For example, the SEC claimed, then later abandoned the claim, that transactions involving Ether, the second most common crypto-asset following Bitcoin, are investment contracts.

The SEC initiated this lawsuit against Zhao and three companies—BAM Management U.S. Holdings, BAM Trading Services, and Binance Holdings—in June 2023. Note that this case is distinct from criminal charges brought against Zhao and Binance Holdings by the Department of Justice.

In November 2023, Binance acknowledged responsibility for engaging in anti-money laundering, unlicensed money transmitting, and sanctions violations. As a result, the company was fined $4.3 billion, and Zhao spent four months in a U.S. prison. The SEC also filed lawsuits against several other cryptocurrency companies and issued a Wells notice to gaming company Immutable last week.