Leading cryptocurrency exchange Binance has faced the SEC in court, seeking dismissal of a lawsuit filed by the regulator. The key issue debated was whether certain cryptocurrencies, including BNB and BUSD, traded on Binance are securities under SEC regulations.
U.S. District Court Judge Amy Berman Jackson questioned both parties regarding the application of the Howey test, a criterion used to determine if an asset qualifies as a security.
The SEC’s lawsuit, filed in June, accuses Binance Holdings and its former CEO Changpeng Zhao of various violations, including misleading customers, allowing U.S. investors to use Binance.com, misusing capital, and operating as an unregistered exchange. It identifies 12 tokens as securities, including BNB and BUSD.
A central debate in the hearing was whether token sales in secondary markets should be treated the same as primary sales. Binance argued that secondary market sales on its platform don’t meet the Howey test’s criteria, particularly regarding the pooling of funds in a common enterprise.
The SEC, however, contended that tokens retain their security characteristics in all sales and that creating a secondary market can drive their value. The regulator also argued Binance’s BUSD should be considered a security, citing its bundled sale with yield-earning services.
Binance invoked the major questions doctrine, arguing for clearer congressional authorization in defining the SEC’s regulatory scope. However, Judge Jackson expressed skepticism about applying this doctrine to the cryptocurrency industry, given its narrowly defined criteria.
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- Source: https://www.cryptocompare.com/email-updates/daily/2024/jan/23/
