A judge has dismissed the allegations by the U.S. Securities and Exchange Commission (SEC) that the cryptocurrency and secondary sales of Binance’s BNB token are not securities. On July 2, Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia ruled that the regulatory body failed to prove how the secondary buyers of BNB were purchasing the tokens with the expectation of profit rather than utility.
Judge Jackson stated, “The court finds that the SEC has failed to argue that the purchasers in the secondary market acquisitions of BNB were motivated by profit expectations rather than other uses, which is a key criterion through the Howey Test—a legal framework outlined by the Supreme Court to determine if a transaction qualifies as an investment contract.”
Previously, the SEC claimed that 68 cryptocurrencies were securities. In June 2023, BNB and nine other cryptocurrencies were sued by Binance and Coinbase for alleged securities violations and were included in the list.
Binance and its founder Zhao were sued by the SEC for misappropriating billions of user funds. The exchange was ultimately charged with violating anti-money laundering laws and paid a fine of $4.3 billion.
Judge Jackson’s latest ruling was praised by Coinbase, which has been emphasizing the importance of the Howey Test in determining what cryptocurrencies are.
Just over a year ago, the U.S. regulator sued Coinbase, accusing it of operating as an “unregistered securities exchange, broker, and clearing agency.”
Coinbase CEO Brian Armstrong countered the lawsuit, saying it reflected the SEC’s “misguided and willful refusal” to provide clarity for the cryptocurrency industry.
Armstrong even suggested that Coinbase was considering leaving the U.S. due to the SEC. He said, “I think if we don’t see regulatory clarity in the U.S. in a few years, we might have to consider investing more in other parts of the world.”
In a recent document submitted to the U.S. Court of Appeals, the cryptocurrency exchange Coinbase fiercely criticized the SEC, claiming that the regulator’s “destruction of digital assets is serious.”
Coinbase’s Chief Legal Officer harshly criticized the SEC for “strangling” the industry.
“Today, we filed our closing arguments in the Third Circuit Court, questioning the SEC’s refusal of our rule-making petition. The core of the case under review is a conclusive sentence in the SEC order being reviewed. That sentence—’disagree’ that the SEC’s rules for digital are unworkable…,” tweeted paulgrewal.eth (@iampaulgrewal) on May 31, 2024.
Despite Binance’s victory over the SEC, the price of BNB is still at a loss this week, having fallen by 5% in the past five days.
Nevertheless, its price has risen by over 120% this year, reaching an all-time high of $717.48 last month.
According to a recent Forbes survey, CZ holds 64% of the BNB supply, totaling $56 billion, which makes up the majority of his $61 billion net worth.
Forbes researchers spent months trying to determine exactly how many billions Zhao owns. It accounts for 64% of the total supply, with a nominal value of $56 billion. Authors: @eltrade and @Steven_Ehrlich
Currently, CZ is serving a four-month sentence in a low-security federal prison in California and still retains 90% of Binance’s shares.