Lawyers for Binance and former CEO Changpeng Zhao, also known as CZ, have renewed their bid to have the U.S. Securities and Exchange Commission (SEC) lawsuit dismissed. This latest filing, submitted on Monday, calls for the dismissal of the SEC’s amended complaint against the crypto exchange, which was revised last month.
Binance, CZ Challenge SEC’s Amended Lawsuit
The defense team’s motion argues that the amended complaint contradicts a previous court ruling, which established that digital assets themselves do not inherently qualify as securities. The filing contends that, despite this precedent, the SEC continues to claim that secondary market transactions of crypto assets are “securities” transactions even when these transactions are distant from the original asset distribution by developers.
The defense team criticized this stance, stating the amended complaint “pays lip service” to the earlier ruling yet “refuses to accept the logical conclusion of that ruling.” The team emphasized that secondary sales of crypto assets are distinct from initial distributions and should not automatically be classified as securities transactions.
Binance and its former CEO Zhao Changpeng’s legal team filed a motion to the U.S. SEC to dismiss the SEC’s amended lawsuit, claiming that the SEC lacks clear regulatory standards for crypto assets and criticizing its “arbitrary” decision on which crypto transactions are…
— Wu Blockchain (@WuBlockchain) November 5, 2024
The motion also took aim at the SEC’s lack of regulatory clarity in regard to digital assets. It argued that the SEC has yet to establish a consistent standard for evaluating whether crypto transactions fall under securities law. “The SEC still refuses to articulate any standard for courts, litigants, or market participants to know which crypto-asset transactions qualify as investment contracts, and which do not,” the filing stated.
SEC’s Changing Stance on Crypto in Spotlight
The defense further highlighted that the SEC’s enforcement approach appears inconsistent, claiming the agency “continues to choose winners and losers arbitrarily.” The motion also pointed to the SEC’s changing stance on major cryptocurrencies.
Recently, the agency unexpectedly withdrew its position that transactions involving Ethereum (ETH), the second largest crypto after Bitcoin (BTC), fall under securities laws. The defense suggested that this abrupt shift exemplifies the agency’s selective and unpredictable approach.
The SEC initially filed its lawsuit against Zhao, along with three Binance-related entities—BAM Management U.S. Holdings, BAM Trading Services, and Binance Holdings—in June 2023. The suit, which is independent of separate criminal charges against Zhao and Binance by the Department of Justice, centers on allegations related to unregistered securities offerings.
Binance recently admitted to offenses including anti-money laundering violations and unlicensed money transmission activities in a November 2023 settlement with the DOJ, resulting in a $4.3 billion penalty. Zhao was also incarcerated for four months in the U.S. before his release.
The SEC has taken a similarly aggressive stance against other crypto firms. Last week, it issued a Wells notice to gaming company Immutable, signaling potential charges against the firm.
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