Federal Judge Amy Berman Jackson has mandated a court review to determine whether digital assets, particularly those involved with Binance, should be classified as securities. The move comes in the context of the ongoing lawsuit between the U.S. Securities and Exchange Commission (SEC) and Binance.
Are Digital Assets on Binance Securities in Perpetuity?
The order, dated January 18, outlines that Judge Jackson will listen to arguments from both the SEC and Binance US regarding the classification of digital assets and staking products. Of particular interest is the question of whether a digital asset retains its status as a security indefinitely. Furthermore, the court will delve into the SEC’s allegations that staking, a process in which individuals lock up their cryptocurrencies to support network operations, may fall under the definition of a security.
Judge Jackson stated:
The Court intends to hear arguments on whether an investment contract must involve a contractual undertaking and whether the SEC ‘misunderstands the meaning of “scheme” in Howey’ from one defense attorney only.
The reference to the Howey test, which assesses whether an asset qualifies as an investment contract, indicates its pivotal role in determining the SEC’s standards for securities.
The court document reveals that the defendants, including Binance Holdings Limited, Changpeng Zhao, and BAM Trading Services, have proposed dividing arguments for the hearing scheduled on January 19, 2024. Notable points include discussions on the contractual aspects of investment contracts, the interpretation of “scheme” in the Howey case, and the plausibility of SEC allegations concerning the sale of tokens such as BNB and Binance USD.
The court proceedings will also address issues related to the major questions doctrine and whether litigation is the appropriate avenue for the SEC to regulate the crypto industry. It remains uncertain when both sides will present their arguments on these critical matters.
This court-ordered review signals a pivotal moment in the legal landscape surrounding digital assets, with potential implications for how cryptocurrencies are classified and regulated in the United States. The outcome of this case could have far-reaching consequences for the broader crypto industry and its participants.
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