In a landmark decision for the crypto industry, a U.S. federal court ruled that BNB and BUSD tokens aren’t investment contracts, and their secondary sales don’t qualify as securities transactions.
Under the chairmanship of Judge Amy Berman Jackson, the U.S. District Court for the District of Columbia dismissed multiple lawsuits filed by the Securities and Exchange Commission (SEC) against Binance.US. Specifically, the court determined that BNB isn’t a security, and transactions involving the token don’t fall under the SEC’s regulatory purview.
Judge Berman Jackson stated that the SEC failed to provide sufficient evidence that purchasers on the secondary market acquired BNB with an expectation of profits, a key criterion under the Howey Test for defining an investment contract. The judge also criticized the SEC for attempting to confuse the court, disregarding existing precedents.
The court addressed BUSD, noting that it can’t be classified as a security because transactions involving it don’t constitute investment contracts. The presiding judge emphasized that the federal court relied on the U.S. Department of Justice’s opinion, which doesn’t recognize stablecoins as securities.
Thus, the court’s decision sets a significant precedent for the entire crypto industry, asserting that cryptocurrencies aren’t securities and don’t fall under the jurisdiction of the SEC. Essentially, for the regulator to establish its authority, it’ll now have to base its arguments on the circumstances of each individual transaction, rather than on the mere issuance of cryptocurrencies.
Despite rejecting the SEC’s claims regarding BNB, the court didn’t fully dismiss the regulator’s case against Binance.US. Specifically, the court is prepared to hear the SEC’s arguments regarding direct sales of BNB, which the SEC considers securities transactions. The next court hearing on the matter is scheduled for July 9. Representatives of Binance.US expressed readiness for a prolonged legal process.
Following the FTX collapse, the SEC began actively pursuing crypto exchanges, filing lawsuits against Binance, Coinbase, Kraken, and others.
