SEC Seeking Leave to Amend its Case Against Binance

The U.S. SEC is seeking permission to amend its initial complaint against Binance. This move allegedly implies that the SEC may have encountered difficulties in substantiating its case and needs time to enhance its arguments. Allegedly, the regulatory body could drop its charges against ten tokens issued by entities other than Binance, such as SOL, MATIC, and ADA. It looks like the SEC doesn’t have a strong enough case to prove that every coin in the initial filing is a security and now intends to simplify its complaint, retaining its original position.

According to the document, the SEC intends to include additional details regarding so-called Third-Party Crypto Asset Securities, “obviating the need for the Court to issue a ruling as to the sufficiency of the allegations as to those tokens at this time.” This is a joint response from both sides on how to proceed further. It was ordered by the court earlier this month when Binance and SEC were required to set deadlines for any motion to amend the complaint or for relief from the recent decision on a motion to dismiss. 

The motion to amend is due within 30 days after the Scheduling Order is approved by the court.

While the parties agreed to a schedule of motions, they were unable to reach an agreement on when the discovery should commence. The defendants insist that it cannot commence unless they review the SEC’s proposed amended complaint. The SEC claims that it is not “premature” or “unreasonable” to conduct merits discovery as to the charges that already “survived” the Defendants’ motion to dismiss.

The SEC sued Binance, Binance.US and its former CEO Changpeng Zhao last summer for various alleged securities law violations, including the operation of unregistered exchanges and broker-dealers, and the unregistered offer and sale of securities. Defendants petitioned the court to have the lawsuit dismissed. The regulator later brought similar charges against Coinbase and Kraken last year and against Consensys and MetaMask last month.

At the end of June 2024, a federal judge permitted the majority of the SEC's 13 claims against Binance to proceed while dismissing particular parts tied to the Simple Earn program, including the sale of BUSD stablecoin and the secondary sales of BNB tokens. Even though the majority of charges were approved, the ruling was much lauded within the crypto industry, with Binance describing the ruling as a positive step.

“This decision is more than just a legal win for Binance; it recognizes there are critical limits on the SEC’s regulatory authority over the crypto industry. The court appropriately criticized the SEC’s decision to litigate the billion-dollar industry through a “case by case, coin by coin, court after court” approach, which creates inconsistent results and ambiguity,” - reads the company’s blog post. 

Back then, Binance said they expected the SEC to face significant challenges in proving the rest of the claims, which is probably exactly what has played out in this latest update.

While both sides are apparently making great efforts to win the legal battle, not everything depends on the effectiveness of their respective legal arguments. The upcoming presidential elections in the U.S. can make their own adjustments. Trump recently promised to fire Gary Gensler on the first day of his administration and that “Joe Biden and Kamala Harris' anti-crypto crusade will be over.”