Binance and CZ’s lawyers file motion to dismiss SEC’s lawsuit

Lawyers representing Binance and former CEO Changpeng “CZ” Zhao have filed a motion to dismiss an amended complaint submitted by the SEC last month in the ongoing legal battle.

In a Nov. 4 filing, the lawyers representing Binance(BNB) and CZ argue that the Securities and Exchange Commission amended complaint pays “lip service” to the court’s previous ruling that does not recognize crypto assets as securities. Despite this, they believe that the SEC has refused to acknowledge the ruling’s impact on the trade of digital assets.

Abiding by the court’s ruling that crypto does not fall under securities, then that would mean secondary market resales of the assets does not count as “securities” transactions.

“The SEC’s Amended Complaint continues to insist that virtually all transactions involving crypto assets—including blind secondary market resales of tokens—are securities transactions because some buyers might hope the assets will increase in value,” wrote the lawyers.

The filing also points out that the SEC’s amended complaint still lacks the legal basis that differentiates between assets and investment contracts, arguing that assets themselves do not count as investment contracts simply because they were offered to customers “as part of a package of promises and expectations.”

Moreover, it states that the SEC still does not implement clear standards for courts, litigants, or market participants that indicate which digital asset transactions fall under the category of investment contracts and which do not.

They claim the SEC has a tendency of choosing “winners and losers arbitrarily,” mentioning a recently abandoned case involving Ether transactions that were recognized as investment contracts.

“The agency even admits that its non-test cannot differentiate securities from Beanie Babies at the pleading stage,” the lawyers wrote.

The rest of the document details the arguments against cases that the SEC have brought up involving Binance and CZ. The document ends with a request to dismiss the SEC’s claims against Binance and Changpeng Zhao without leaving room to amend.

Last September, SEC filed an amended complaint again Binance and CZ, stating that it never intended to assign the securities label to cryptocurrencies and tokens. The agency explained it uses securities as a shorthand to refer to various aspects of crypto sales.

In the end, the SEC vowed to use the term “crypto asset securities” and apologized for the confusion it caused.

On June 5, 2023, the SEC filed a lawsuit against Binance, CZ, and several affiliated companies for violating securities trading regulations. The agency cites the violation on the grounds of a court document that the SEC recognized the BNB token and the BUSD stablecoin as securities.

Binance is not the only crypto-related entity to have legal troubles with the SEC due to being regarded as a security. The SEC also have lawsuits against Coinbase and Ripple based on allegations that these businesses offered unregistered crypto asset securities.