US Federal Judge Criticizes SEC's Stance on Binance Case

Source: Photo by Vadim Artyukhin on Unsplash

US Federal District Judge for the District of Columbia, Amy Berman Jackson, has criticized the Securities and Exchange Commission (SEC) for its position on crypto assets in its lawsuit against Binance Holdings Ltd. The SEC has also been urged to define the boundaries of what constitutes a security or a virtual token.

The ongoing trial involving Binance has garnered attention from the industry as it could serve as a tool to determine the extent of the SEC's jurisdiction over crypto.

Another judge is also considering similar questions in the SEC's case against Coinbase Global Inc., the largest digital asset platform in the US.

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According to Yahoo Finance, during Monday's (1/22) hearing, Jackson stated that the SEC seems to be suggesting that all digital assets are securities. "How can issuers know when they cross the line?" Jason remarked.

In June, the SEC claimed that Binance and former CEO Changpeng Zhao mishandled customer funds, misled investors and regulators, and violated securities rules. They also accused the company of offering unregistered securities to US investors. The company and Zhao are currently contesting these allegations in court.

Binance's Legal Argument

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As part of its argument, Jason Mendro, Binance's attorney, stated that the company has no obligation to investors after selling specific tokens, which is required if the asset is considered a security.

Binance also argues that the SEC did not provide fair notice regarding its interpretation of securities laws. Jackson mentioned during the trial that she did not find that argument persuasive.

Read also: Hit by Regulations, Binance Market Share Declines Throughout 2023
As of now, US courts are still divided in resolving the issue of whether digital tokens are securities and subject to SEC oversight or not.

In July, a federal judge in Manhattan ruled that the sale of Ripple's XRP token did not fall under the SEC's jurisdiction. However, another judge in the same month took a contrary view in the SEC's case against Terraform Labs Pte.

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