As a seasoned crypto investor with a decade of experience under my belt and a portfolio that’s seen more ups and downs than a rollercoaster ride at CryptoLandia, I can’t help but feel a mix of emotions reading about the SEC’s latest move against Binance.
The U.S. Securities and Exchange Commission (SEC) has resisted attempts to throw out their legal action against Binance, Binance.US, and the company’s former CEO, Changpeng Zhao, in a court case.
The regulator accuses them of running an unregistered securities exchange through the trading of BNB, Binance’s native token, and ten other cryptocurrencies.
Details From the Filing
The situation hinges on the Howey Test, a legal benchmark employed to identify if an entity is considered a security. Essentially, this test checks three key factors: 1) Was there an initial investment made? 2) Does the investment involve a shared endeavor with others? and 3) Is any profit anticipated that stems from the labor of others rather than individual effort?
As a researcher, I find myself in agreement with the Securities and Exchange Commission’s (SEC) stance on the Binance case. According to them, the exchange has led users to believe that the value of their tokens is directly tied to the success of Binance’s ecosystem. This, in turn, instills an expectation among users that they will reap profits from this arrangement.
As an analyst, I’m extending my argument here to counter Binance’s stance that secondary market trades don’t fall under the purview of securities laws. Instead, I’m proposing that these transactions should be assessed using the Howey Test as well, which would imply that they are subject to securities regulations.
As a researcher, I’ve been following the progress of the financial watchdog’s lawsuit against Binance and Zhao, which was initially filed earlier this year. However, Judge Amy Berman Jackson raised concerns about some of the watchdog’s arguments, leading them to amend their complaint. In response, on November 4, Binance and Zhao submitted a motion to dismiss the revised complaint, claiming that the regulator has not presented sufficient evidence to support their case.
In a recent legal submission, the SEC is persistently focusing on BNB and a further nine digital currencies, classifying them as securities. Among these are Solana (SOL), Cardano (ADA), Polygon (MATIC), Filecoin (FIL), Cosmos (ATOM), The Sandbox (SAND), Decentraland (MANA), Algorand (ALGO), Axie Infinity (AXS), and COTI.
The Securities and Exchange Commission (SEC) defended itself against accusations from the cryptocurrency sector, arguing that it hasn’t exceeded its authority as claimed. In their submission, the agency argued, “The predicted excessive and supposed suffocating control over an entire industry has not materialized, yet they still express concerns about this.
Industry Experts Weigh In
Simultaneously, not all parties share the same views on the regulator’s approaches. Paul Grewal, Coinbase’s chief legal officer, voiced his criticism towards the agency, stating that their enforcement appears inconsistent to him. In a tweet, he raised questions about why Ethereum (ETH) and Bitcoin (BTC) haven’t been officially classified as securities by the SEC yet.
Stuart Alderoty, Ripple‘s legal representative, also commented, taking aim at SEC Chair Gary Gensler who is scheduled to depart on January 20, 2025. It’s worth noting that President-elect Donald Trump intends to appoint Paul Atkins, a strong supporter of cryptocurrency, in his place. Alderoty claimed that Gensler hastily submitted the recent 81-page document before vacating office, labeling it as rehashing ‘worn-out arguments.’
Attorney John Deaton, who specializes in crypto law, urged the Securities and Exchange Commission (SEC) to revisit the original ruling in the Howey case. He underscored that the decision stated that it doesn’t make a difference if an asset has inherent value or if the venture is speculative.
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2024-12-07 01:30