Binance in Hot Water? SEC Challenges “Confusing” Rules and Jurisdiction Oversight

The SEC vs Binance lawsuit witnessed a fiery oral argument session on the January 22 (Monday) court hearing. Mathew Gregory and the counsel representing Binance faced criticism from Federal Judge Jackson regarding its arguments to toss out SEC’s complaint against Binance.

On the other hand, the SEC has yet to defend its jurisdiction on cryptocurrency. 

Allegations & Defenses

The SEC contends that Binance’s trading of crypto assets falls under its regulatory oversight, classifying them as securities. Among the accusations are inflating trading volumes, diverting funds, and facilitating unregistered securities trading.

Matthew Gregory, Binance’s legal representative, spotlighted what he deemed as the SEC’s conflicting signals to the crypto industry.

“The SEC to this day has been talking out of both sides of its mouth when it comes to crypto tokens … They’re telling the industry (to) come in and register, while simultaneously with their other hand holding the door closed and preventing any viable path to do that.”

This legal hurdle for Binance follows a substantial $4.3 billion settlement with the Department of Justice in November, coupled with the departure of ex-CEO Changpeng ‘CZ’ Zhao, who pleaded guilty.

Understanding the Definition of “Security’

The Securities Act of 1933 provides a framework for what constitutes a “security.” However, Supreme Court cases play a pivotal role in determining whether an asset falls under this definition. The litmus test involves evaluating whether investors are engaged in a common enterprise with profit expectations.

The SEC argues that there is “no bright line” in making this determination, emphasizing the flexibility of the definition based on individual cases and circumstances.

Skepticism Remains

U.S. Federal Judge Amy Berman Jackson questioned both sides, expressing skepticism about Binance’s argument on invoking new crypto regulation rules when previous cases have shown that security laws are “for flexibility and investor protection.”

Monday’s fiery courtroom saga was similar to last week’s Coinbase hearing but differs in that the SEC’s case against Binance includes fraud and market manipulation allegations. As the crypto industry watches closely, Judge Jackson challenged the SEC to define the limits of its jurisdiction over digital assets, highlighting the ongoing struggle between regulators and the increasingly sophisticated crypto firms.

The verdict will influence how these digital assets are traded, regulated, and acknowledged by U.S. authorities.

Did You Know? Binance Opens Doors to Thailand’s Crypto Market with New Exchange Launch