In a four-hour hearing at the Washington District Court, cryptocurrency exchange giant Binance and the U.S. Securities and Exchange Commission (SEC) clashed over the regulatory status of crypto assets. The presiding Judge, Amy Berman Jackson, appeared visibly frustrated with Binance’s legal team, particularly with their repeated argument that investment contracts must involve a tangible agreement.
Binance Vs. SEC Showdown
The focal point of the hearing was the SEC’s 13 charges against the exchange, filed in June 2023. The regulatory body accused the exchange of offering and selling unregistered securities through its BNB and BUSD tokens, among other listed coins. It raised concerns about the commingling of client assets.
Judge Jackson began by challenging Binance’s stance on the applicability of securities laws to cryptocurrencies. She questioned the defense’s assertion that the laws, written for traditional financial instruments, could be flexibly applied to this nascent industry without a clear congressional mandate. Binance’s attorney, Jason Mendro, argued for limiting factors within the statutes to avoid overreach, drawing a parallel with real estate potentially being considered a security.
The hearing also saw Judge Jackson express skepticism about Binance’s interpretation of the Howey test, a crucial factor in determining the existence of an investment contract. She warned against wasting time combing through Howey’s factors for each alleged asset.
The proceedings took an interesting turn as both Binance and Coinbase, who faced the SEC in a similar hearing the previous week, sought to invoke the major questions doctrine. This legal principle posits that courts shouldn’t interpret congressional law as granting agencies the authority to rule on matters of “major” political or economic significance.
Binance, in its motion to dismiss, emphasized the broader implications of the SEC’s arguments, claiming that more than the crypto market was at stake. Judge Jackson acknowledged the case’s significance for the entire crypto industry but expressed reluctance to apply the major questions doctrine.
The hearing unfolded against the backdrop of a plea agreement between Binance and its founder, Changpeng Zhao, involving a hefty $4.3 billion combined financial penalty with various government entities. However, the crypto community anxiously awaits Judge Failla’s decision on whether to dismiss the SEC’s case against Coinbase in the coming weeks or months.
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