Binance and SEC Likely Headed for Settlement, Predicts Former SEC Official

The long-standing litigation involving Binance, the world’s largest cryptocurrency exchange, and the U.S. Securities and Exchange Commission (SEC) is potentially nearing a resolution. The prediction came from John Reed Stark, the Former Chief of the SEC Office of Internet Enforcement. He suggested that a settlement between the two parties might be in the offing after U.S. District Judge Amy Berman Jackson declined the SEC’s request to freeze the assets of Binance’s U.S. arm.

Judge Calls For Mediation in Binance-SEC Dispute

Amy Berman Jackson has asked the parties to enter into a mediation hearing, potentially opening a path for Binance’s U.S. affiliate to continue its basic operations. This step is viewed as a sign that a resolution may be achievable without drastically impacting the crypto exchange’s functioning.

Stark’s analysis of the proceedings indicated that Judge Jackson expressed some skepticism about the SEC’s approach toward the crypto industry and its enforcement methodology. He suggested this could lead to an agreement during the mediation process with the magistrate judge, though the federal judge may still need to step in to decide on certain key matters such as the size of “ordinary business expenses”.

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Potential Outcomes: Consent Order and Regulatory Clarity

Stark theorized that a likely outcome of the case could be a “Consent Order” between Binance and the SEC, which would make a Temporary Restraining Order on the asset freeze unnecessary. He added that a well-crafted consent decree would offer the SEC most of the relief it had requested, allowing the judge to preserve the status quo and manage the case at a reasonable pace.

In a tweet, Stark noted, “Some argue that the judge in the SEC/Binance case expressed skepticism about the SEC’s use of its enforcement powers to regulate the crypto world, calling it ‘inefficient and cumbersome’.” 

The Role of Regulatory Clarity

One argument that has been highly prominent in the crypto industry and this lawsuit is the lack of regulatory clarity. Stark, referring to exchanges with Judge Butler, argued that the “regulatory clarity” defense is more suitable for Congress and may be irrelevant to the court proceedings.

The SEC, in response to Judge Jackson, reaffirmed its stance stating that the Howey Test, a rule used to determine whether certain transactions qualify as investment contracts, has been established since the 1940s, and Binance was aware of it.

Based on Stark’s prediction, a mediated settlement could potentially alleviate tension between the SEC and the crypto industry. It may also set a precedent for future interactions between crypto entities and regulatory bodies. However, the final resolution of the case and its impact on the broader crypto industry remains to be seen.

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