COURT HANDS BINANCE PARTIAL VICTORY, SEC LOSES GROUND
Federal judge Amy Berman Jackson just carved a narrow but telling hole in the SEC’s sweeping crypto crackdown. In a 93-page order she ruled that Binance’s BNB token does not automatically count as an investment contract when sold on the open market, while the unregistered-exchange and unregistered-broker claims against the exchange itself survive. The split decision shows how difficult it is for the Commission to stretch the Howey test across every token sale once coins have left the issuer’s hands.
The lawsuit began in June 2023 when the SEC accused Binance Holdings, its U.S. affiliate BAM Trading, and founder Changpeng Zhao of operating an unregistered exchange, offering unregistered securities, and commingling customer funds. Binance countered that the SEC lacked authority over secondary-market trades and that most tokens sold by the platform were commodities, not investment contracts. The court agreed with part of that defense: once BNB moved from Binance’s control to public trading venues, later purchasers could no longer be said to rely on Binance’s managerial efforts, breaking the Howey chain. Yet the judge let stand allegations that the exchange itself acted as an unregistered broker and that Binance.US misled users about trading controls.
The ruling trims the SEC’s case but does not end it. Binance still faces claims tied to its U.S. operations and the marketing of Simple Earn and BNB Vault products. Zhao, who already pleaded guilty to Bank Secrecy Act violations in a parallel criminal case, is not a defendant in this civil docket. The decision also leaves the SEC’s authority over unregistered exchanges intact, preserving leverage for future settlement talks or trial.
In plain English, the opinion signals that tokens freely trading on secondary markets are harder to brand as securities than tokens sold directly by promoters. It forces the Commission to prove specific promises of profit tied to each resale, not merely assert that every token is a security by default. That evidentiary burden may slow enforcement sweeps and push the agency toward narrower, better-documented complaints.
For crypto markets the ruling is a modest reprieve. Exchange tokens and large-cap assets now carry marginally less classification risk, easing some compliance pressure on trading platforms. DeFi protocols that merely list secondary pairs face lower legal overhang, while issuers contemplating direct sales still confront full regulatory exposure. Traders may interpret the decision as evidence that courts will police the SEC’s reach, trimming tail-risk of sudden delistings for mature tokens.
The case is far from closed, but the opinion underscores that enforcement power has limits and that secondary-market realities matter.