Binance and Changpeng Zhao Seek Dismissal of SEC Lawsuit, Citing Regulatory Overreach

Updated: 22 September 2023

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Binance Holdings and its CEO, Changpeng Zhao, requested the dismissal of a lawsuit brought against them by the Securities and Exchange Commission (SEC), arguing the regulator had overstepped its authority.

In a 60-page motion filed on Sept. 21, Zhao and his exchange called the SEC’s lawsuit a retroactive attempt to use its regulatory power against them after failing to put in place the necessary guidelines.

https://twitter.com/TheHongVan68/status/1705049040180871363

The filing said that as recently as 2021, SEC Chair Gary Gensler had publicly acknowledged that no “regulatory framework” existed under the authority of the SEC for crypto exchanges and that “only Congress” could confer that authority.

It argues that the SEC suddenly reversed course last year when it began asserting that virtually all crypto assets are securities subject to its authority.

“The SEC pursues these novel theories retroactively, seeking to impose liability for sales of crypto assets that occurred as far back as July 2017, before the SEC provided any public guidance concerning cryptocurrency,” it said. “It is clear that the SEC’s lawsuit has no foundation in the currently enacted securities laws.”

Binance and Zhao’s lawyers also accused the SEC of fundamentally misinterpreting securities regulations and how they apply to digital assets, challenging the SEC’s argument that digital assets are securities.

Binance In Legal Battle With SEC Since June

Binance.US, the exchange’s US division, also filed for a dismissal of another lawsuit, again arguing that the SEC’s case has no foundation under current securities laws, Bloomberg reported.

In both filings, the defendants also raised the “major questions doctrine,” which is a Supreme Court decision that instructed federal agencies to wait for Congressional authority over economic or political matters.

The exchange and its CEO have been in a legal battle with the SEC since June when the authority sued them for mishandling customer funds, misleading investors and regulators and selling unregistered securities.

The lawsuits have hammered the exchange’s business in the US and there’s been an exodus of top executives across the world. Binance.US has also laid off 30% of its employees in order to weather a slump in trading volume.