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The United States Securities and Exchange Commission (SEC) has opposed Binance’s arguments to dismiss the lawsuit adding that the motion has no real basis under law.
In a Nov 8 court filing, the securities regulator claims the defendants applied the law incorrectly in an attempt to evade charges and no court in the United States has been bound by the incorrect legal argument terming it a “tortured interpretation of the law.”
The Commission filed charges against Binance in June for allegedly breaching federal securities law by offering trading services to unregistered securities, and asset commingling amongst others.
Similar charges were also filed against Coinbase one day after with both exchanges promising to defend their actions vigorously and seek proper crypto regulations from courts leading to Binance filing a motion to dismiss the suit.
SEC Sues Binance and CZ Over ‘Blatant Disregard’ of Its Rules@binance Holdings Ltd., and its US affiliates, are being charged by the US #SEC for multiple offenses, months after being charged separately by another US regulator.#CryptoNews https://t.co/vMaMsEnJZ7
— Cryptonews.com (@cryptonews) June 5, 2023
SEC fires back
In totality, the financial regulator stressed that the company should not avoid responsibility for its actions by misinterpreting the known legal foundations of the justice system.
“Defendants now seek to avoid the repercussions of their actions by asking this Court to dismantle decades of foundational precedent upon which the nation’s securities laws operate. In its place, Defendants would install a rigid framework that turns entirely on contract law and the form transactions take, in clear contravention of Congress’ broad, flexible regime…”
Per the filing, the Commission duly noted their actions breached the law and requirement set out in the Howey Test and its progeny. It stated that its two platforms Binance.com and Binance.US offer crypto assets to the public including about 12 digital assets and three investment programs that fit the description of investment contracts.
In addition to claims that the initial coin offering of BNB and its staking and yield programs are in violation, the regulator defended its lawsuit in line with the “Major Questions Doctrine,” a Supreme Court decision that Congressional powers were not delegated to agencies.
Several crypto firms have cited the ruling as a defence calling out the overstretched powers and actions of the SEC and the Commodity Futures Trading Commission in their harsh actions against the sector.
Finally, the Commission restated Changpeng Zhao and Binance’s plan of profiting from the US market while trying to avoid responsibility by creating Binance.US.
Binance allegations against the SEC
After the regulator filed the lawsuit, Binance stated that its actions had not breached any existing laws and the SEC did not “plausibly allege” various securities law violations.
The exchange went further to allege that the Commission has overstretched the scope of “investment contracts” adding that it seeks to regulate digital assets outside the scope of Congress.
“The SEC recently brought several enforcement actions – including this action – premised on its new position that virtually all crypto assets, and virtually all crypto-asset transactions, are securities.”
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