SEC and Binance Clash Over Crypto Exchange Regulation

The situation continues to get crazier and crazier in the crypto world.

The Securities and Exchange Commission (SEC) has thrown a legal curveball at Binance Holdings Limited, refusing to let them off the hook in a lawsuit and claiming broad control over crypto exchanges. The battleground? The SEC’s saying they can regulate exchanges by calling digital assets securities.

Paul Grewal, Chief Legal Officer at Coinbase, took the mic on Twitter to break down the SEC’s stance. In a bunch of tweets, he pointed out flaws in the SEC’s argument, saying they’re going too far without a solid legal foundation.

Read on for more details.

Binance’s ICO Adventure

Back in 2017, Binance Binance - binance@miceneurol.com Centralised ExchangeCryptocurrenciesTrading AppCryptocurrency investment , led by C, launched an Initial Coin Offering (ICO) for its token, BNB, setting up the Binance.com platform. The SEC’s beef? They’re saying Binance lured in U.S. investors, dodging rules, and maybe pulling a fast one on investors through Binance.US.

The SEC’s real problem is how they read “investment contracts” in the Howey Test, a rule from the Supreme Court. Normally, it needs a contract for a business venture’s profit. But the SEC says it’s more flexible, not needing a contract or a legally enforceable right. Grewal and the crypto gang aren’t buying it.

Also Read – SEC vs. Binance: Legal Showdown Intensifies Over Howey Test

Why is the law so confusing?

Grewal’s tweets suggest that the SEC’s argument presents a paradox in handling cases involving contractual obligations, specifically when claiming that the Howey precedent does not mandate such requirements. The SEC’s statements seemingly separate Bitcoin (BTC) and Ethereum (ETH) from the discussion, inadvertently questioning their status as securities.

The SEC’s paper says everything Binance does—staking programs, selling BNB and BUSD—falls under investment contracts. They don’t buy Binance’s claim that these are just “ordinary assets” and take issue with the company’s what-ifs.

Read More: Binance Lawsuit Dismissal Request Rejected By SEC; What Next?

Furthermore, the SEC’s memorandum touches on the Major Questions Doctrine, which deals with the agency’s enforcement of congressional enactments, stating that this legal principle does not apply to crypto as Binance suggests.

Once Again – This is a Call for Clarity!

Grewal’s closing tweet presses the need for comprehensive legislation to “put an end to these distortions,” a sentiment echoed by industry advocates seeking to navigate the complex world of cryptocurrency law.