US SEC Leverages Coinbase Case Ruling in Binance Lawsuit Against CZ, Binance

The US Securities and Exchange Commission (SEC) is leveraging Judge Failla’s recent ruling in the Coinbase case to bolster its lawsuit against Binance, Binance US, and Changpeng “CZ” Zhao.

In a significant development, Judge Failla made key decisions regarding securities aspects in the Coinbase case, including wallet service, staking service, secondary market sales, and more. Now, the SEC seeks to apply these rulings to its lawsuit against Binance and other defendants.

SEC Incorporates Coinbase Ruling in Binance Lawsuit

In a court filing on March 27, the SEC submitted a notice of supplemental authority, informing the court about Judge Failla’s rulings in SEC v. Coinbase. This marks the second valid supplemental authority the SEC has presented in the Binance class action lawsuit.

Following an earlier decision by the court regarding supplemental authority, the SEC notified the court without contesting arguments related to Binance’s lawsuit dismissal.

The SEC has charged Binance for unregistered offers and sales of cryptocurrencies like BNB, BUSD, and products such as “Simple Earn” and “BNB Vault.” Additionally, BAM Trading, associated with Binance.US, faces charges for the unregistered offer and sale of Binance.US’ staking-as-a-service program. Judge Failla ruled in the Coinbase case that the staking program qualifies as unregistered securities.

Judge Failla also supported the SEC’s contention that Coinbase operated as an unregistered intermediary of securities, although she denied most of Coinbase’s motions except for the Wallet service.

In both the Coinbase and Binance lawsuits, the SEC has identified 19 cryptocurrencies as securities. These include ATOM, BNB, BUSD, and others. The ongoing proceedings aim to provide further clarity on which crypto assets are considered securities.

Classification of Secondary Market Sales as Securities

The SEC is currently arguing that nearly all cryptocurrencies meet the criteria of investment contracts under the Howey test, thus qualifying as unregistered securities. However, crypto lawyers and firms hold differing views on this matter.

Judge Failla’s ruling in the Coinbase case rejected Judge Torres’ rationale in the Ripple decision, particularly regarding secondary market sales being considered investment contracts.

Meanwhile, the Binance vs. SEC lawsuit is nearing its final stages of dispute resolution. The defendants have fulfilled most discovery and deposition requirements set by the US SEC, with a final joint status report and potential briefing expected in April.