SEC Wins Narrow Victory in Binance Case as Court Keeps Core Securities Claims Alive
SEC SUES BINANCE—COURT KEEPS DOOR OPEN
A federal judge in Washington refused to throw out the SEC’s sprawling lawsuit against Binance, handing the agency its first real win in a case that tests whether the world’s largest crypto exchange broke U.S. securities law. The ruling keeps alive claims that Binance sold unregistered tokens and operated an unregistered exchange, while trimming only the narrowest edges of the complaint. Traders read the decision as proof that the SEC still intends to treat most digital assets as securities, a stance that could reshape exchange compliance and DeFi liquidity for years.
The lawsuit began in June 2023 when the SEC accused Binance Holdings, its U.S. affiliate BAM Trading, and founder Changpeng Zhao of offering unregistered securities, commingling customer funds, and evading anti-money-laundering rules. Binance fought back with a motion to dismiss, arguing that the tokens it listed were not securities, that its offshore structure placed it beyond U.S. jurisdiction, and that the agency lacked authority to police decentralized platforms. Judge Amy Berman Jackson spent months parsing each claim, asking whether the SEC could plausibly allege that Binance’s staking program and token sales met the Howey test for investment contracts.
In a 92-page opinion, the court dismissed only two narrow counts tied to Binance’s simple earn program and certain statements about customer protections, but left intact the core allegations that BNB, BUSD, and a dozen other tokens were sold as investment contracts. The judge also preserved claims that Binance.US operated without registering as an exchange, broker, or clearing agency. Zhao and the companies remain defendants, and the SEC can now move into discovery, where subpoenas and internal documents will test how much trading volume actually touched U.S. customers.
The decision narrows the legal battlefield without changing the strategic map. Binance still faces the threat of injunctions, disgorgement, and possible bars on U.S. operations, while the SEC keeps its broadest weapon—the ability to label tokens securities—largely intact. For other platforms the message is simple: listing tokens with staking yields or marketing them as having future value now carries measurable litigation risk.
Exchanges must weigh the cost of U.S. registration against the risk of enforcement actions that could freeze customer assets or force delistings. DeFi protocols that route volume through Binance bridges or liquidity pools inherit the same exposure, because any token later deemed a security could trigger retroactive liability for intermediaries. Stablecoin issuers like Paxos, which already paused BUSD, now see clearer precedent that marketing a token’s price stability or yield can itself become evidence of an investment contract. Traders face higher compliance costs and thinner order books if exchanges pre-emptively delist tokens to avoid SEC scrutiny.
The ruling signals that courts are willing to let the SEC test its theories in discovery, not that those theories will ultimately prevail.
