Binance Faces SEC: Judge to Rule on Cryptocurrency as Security

Federal Judge Amy Berman Jackson has ordered a court review to assess whether digital assets, especially those linked to Binance, should be classified as securities. This move suggests a significant legal examination of the regulatory status of such assets within the financial framework.

The recent development in the case between the US Securities and Exchange Commission (SEC) and Binance holds the potential for serious ramifications. Specifically, it could significantly impact the SEC’s continuing lawsuit against Ripple.

The January 18 order outlines that Judge Jackson will listen to the SEC and Binance US arguments regarding classifying digital assets and staking products. Of particular interest is whether a digital asset retains its status as a security indefinitely.

Furthermore, the Court will examine the SEC’s allegations. This includes a focus on staking, a process where individuals lock up their cryptocurrencies to support network operations. The central inquiry is whether this activity might fall under the definition of security. Judge Jackson said,

The Court plans to hear arguments on whether an investment contract must involve a contractual undertaking. Additionally, the defense attorney will address the question of whether the SEC “misunderstands the meaning of ‘scheme’ in Howey.”

Are Binance Digital Assets Forever Securities?

Throughout the evaluative process, they allude to determining if an asset is an investment contract within the Howey test. This allusion emphasizes its importance in determining the SEC’s standards for identifying security.

This information has emerged in a court document filed by the defendants, which includes entities such as Binance Holdings Limited, Changpeng Zhao, and BAM Trading Services. They have submitted a notice of motion requesting the bifurcation of issues for the hearing set to take place on January 19, 2024.

The contractual aspect of investment contracts and intervention regarding interpreting “scheme” in Howey’s case are noteworthy. Additionally, the plausibility of SEC claims regarding the marketing and selling of tokens similar to BNB and Binance USD will be a key consideration.

In court proceedings, the major questions of doctrine will be examined closely. Additionally, the appropriateness of litigation over the SEC’s crypto industry regulation will be a key focus. When both sides discuss these critical questions, they will only be studied in the coming times.