SEC Wins Early Round as Binance Faces Full Force of U.S. Regulators
The Securities and Exchange Commission scored a critical procedural victory when Judge Amy Berman Jackson refused to toss its sprawling lawsuit against Binance, preserving the agency’s right to pursue claims that the world’s largest crypto exchange operated an unregistered securities platform and commingled customer funds. The ruling keeps the case alive at a moment when the Commission’s authority over digital assets is under sustained legal and political attack.
The lawsuit began in June 2023 when the SEC accused Binance and its founder Changpeng Zhao of offering unregistered securities through dozens of tokens, running an unlicensed exchange, and secretly routing U.S. customer trades through an offshore entity to evade detection. Binance moved to dismiss most of the claims, arguing that the tokens at issue are not securities, that the SEC lacks jurisdiction over foreign platforms, and that the agency’s enforcement theories stretch the Investment Company Act beyond recognition. Judge Jackson rejected those arguments across the board.
In a 53-page opinion, the court held that the SEC had plausibly alleged that BNB, BUSD, and several other tokens functioned as investment contracts under the Howey test, that Binance.US operated as an unregistered exchange, and that Zhao and the company could be liable for orchestrating the scheme. The judge dismissed only the narrow claim that Binance itself qualified as an investment company, but left every other count intact. The decision means discovery can now proceed, exposing internal communications, token listings, and treasury operations to SEC subpoenas.
At its core, the ruling affirms that U.S. securities law reaches platforms and tokens that exhibit the hallmarks of investment contracts, even when marketed globally. It does not decide whether any particular token is a security, but it rejects the notion that foreign incorporation or decentralized marketing automatically insulates issuers and exchanges from SEC oversight.
For crypto markets, the decision signals that the SEC retains broad enforcement power and that litigation risk for major platforms remains elevated. Exchanges operating in or touching U.S. users must now weigh the cost of prolonged discovery and potential settlements against the possibility that courts will continue to classify many tokens as securities. The ruling also pressures stablecoin issuers whose tokens were named in the complaint, as the court’s willingness to treat BUSD as a plausible security raises fresh compliance questions for similar products. DeFi protocols and token projects that list on centralized venues face heightened scrutiny, while traders should expect continued volatility tied to enforcement headlines rather than immediate regulatory clarity.
The Binance case is far from over, but the SEC has cleared its first major hurdle and demonstrated that aggressive enforcement remains its default posture toward crypto exchanges.