In a bold move against the SEC, Binance, its American counterpart Binance.US, and Changpeng ‘CZ’ Zhao, the founder of Binance, filed motions on Thursday to dismiss the lawsuit against them. At the heart of their defense is the argument that the SEC is attempting to forcefully integrate digital assets into its jurisdiction without a clear mandate from Congress. Binance contends that the regulator has failed to credibly establish that the cryptocurrency exchange and its affiliates have violated securities regulations.
The SEC has recently taken several enforcement actions – including the present action – based on its new position that nearly all crypto-assets and nearly all crypto-asset transactions are securities.
Excessive control or expected regulation?
The initial cause of this confrontation was the SEC’s complaint in June, accusing Binance, CZ, and Binance.US of illegally listing unregistered securities, including multiple cryptocurrencies. This legal action has not only sparked a dispute over customer fund access rights at Binance.US, but has also triggered a broader debate on the SEC’s jurisdiction over digital assets. Binance’s legal representatives maintain that the SEC’s interpretation of securities law amounts to an abuse of power. Furthermore, they insist that the regulator’s claim that nearly all crypto assets and their associated transactions are securities is an exaggerated extension.
Awaiting a signal from Congress
A fascinating aspect of Binance’s defense strategy revolves around the “major questions doctrine,” an iconic decision by the Supreme Court. This doctrine requires federal agencies to wait for and seek approval from Congress when facing significant economic or political questions. Binance’s documents emphasized that since 2019, Congress has considered several proposals to establish a clear and functional framework for cryptocurrency assets and trading platforms. Notably, none of these proposals intended to grant the SEC exclusive regulatory supremacy over the crypto sector. Despite this, the SEC has taken it upon itself to expand its influence, implicating Binance and its key figures in the lawsuit.