Binance, Binance US, and founder Changpeng Zhao (CZ) have filed a joint motion to dismiss the lawsuit filed against them by the US Securities and Exchange Commission (SEC).
In a joint motion filed in the US District Court for the District of Columbia on Thursday, September 21, Binance-related entities and CZ claim that the SEC has come out of its boundaries in filing the lawsuit, which also lacks a foundation.
The legal battle between Binance and the SEC is not over yet. Recently CEO Chanpgeng Zhao asked the court to dismiss the SEC suit.
Binance Holdings, it's U.S. counterpart and CEO Changpeng Zhao have filed motions seeking the dismissal of a lawsuit against them by the Securities… pic.twitter.com/gBtxkqVn6Z
— VK.BNB (@TheHongVan68) September 22, 2023
Binance Holdings Limited and its founder said that Congress had yet to approve a workable framework for crypto assets and their trading. Any regulation would not “confer sole regulatory jurisdiction over the crypto industry to the SEC.” Yet, the US federal securities regulator wants to dictate the crypto sector. The filing reads:
“Despite this, the SEC now seeks to expand its authority and filed this lawsuit, asserting claims against Binance Holdings Limited (“BHL”) and Changpeng Zhao, among others. It is clear that the SEC’s lawsuit has no foundation in the currently enacted securities laws.”
SEC Misinterperts Securities Laws For Crypto, Says Binance
The 60-page document asserts that the SEC has overstepped its authority in suing the cryptocurrency exchange. Binance said the regulator misinterprets the securities laws to claim regulatory power over the crypto industry. Furthermore, it is holding Binance Holdings Limited (BHL) liable for the sale of cryptocurrencies that occurred way before it issued any guidelines regarding crypto assets.
In suing Binance.com, the Binance legal team also accuses the SEC of defying Supreme Court precedent that limits the agency’s regulatory authority to US borders. The regulator is just pursuing “novel theories retroactively” in its enforcement actions against crypto and BHL. “As the SEC lacks authority to do this, BHL and Mr. Zhao respectfully move to dismiss the Complaint,” reads the filing.
In the lawsuit, the SEC claims that by offering BNB, stable BUSD, BNB Vault, and Simple Earn, Binance group “violated registration requirements in the federal securities laws and that Mr. Zhao, as founder and CEO, is responsible as a control person for those alleged violations.” According to BHL, however, the agency failed to prove these assets and products constitute investment contracts when subject to the Howey Test. It is only the SEC’s novel spin on the meaning of investment contracts.
“If there is any doubt that the SEC’s novel spin on the meaning of “investment contract” is wrong, then the major-questions doctrine resolves that doubt against the SEC. Only Congress can make policy choices of the magnitude the SEC is asking the court to make here.”
Furthermore, the SEC’s securities claim against BNB’s initial coin offering (ICO) also fails as, among other reasons, the sale happened in July 2017, and the agency “failed to provide fair notice that crypto assets such as the BNB token are subject to the securities laws until at least the end of that month.”
“Indeed, the entire Complaint fails because the SEC did not provide fair notice of its novel interpretation of the securities laws,” said BHL.
As previously reported, Binance has recently scored a little victory over the SEC after the court denied the agency’s request to inspect Binance US software amid the SEC’s complaints alleging Binance for not cooperating with the investigation.