SEC claims BNB secondary trading and these 10 tokens qualify as securities under the Howey test

The US Securities and Exchange Commission (SEC) has rejected efforts to dismiss its lawsuit against cryptocurrency exchange Binance, its US branch Binance.US and former CEO Changpeng Zhao.

The regulator accuses them of running an unregistered stock exchange by trading BNB, Binance’s native token and ten other cryptocurrencies.

Details of the presentation

The case is based on the Howey test, a legal standard used to determine whether something qualifies as a security. In simple terms, the test examines whether there was an investment of money, a common enterprise and an expectation of profit from the efforts of others.

The SEC says the Binance case meets all three criteria. He says the exchange led users to believe that the value of their tokens depended on the success of the Binance ecosystem, creating an expectation of profit.

His filing goes further by challenging Binance’s position that secondary market operations fall outside the purview of securities laws, stating that such transactions are also governed by the Howey test.

The financial watchdog lawsuit, which was first filed earlier this year, faced criticism from Judge Amy Berman Jackson, who questioned some of its arguments. This prompted the SEC to amend its complaint. Binance and Zhao responded by filing a motion to dismiss the amended complaint on November 4, arguing that the regulator did not provide enough evidence.

However, in its most recent court filing, the SEC continues to target BNB and ten other cryptocurrencies, labeling them as securities. These include Solana (SOL), Cardano (ADA), Polygon (MATIC), Filecoin (FIL), Cosmos (ATOM), The Sandbox (SAND), Decentraland (MANA), Algorand (ALGO), Axie Infinity (AXS) and COTI .

The SEC also dismissed criticism from the crypto industry, rejecting claims that it is overstepping its authority. In its filing, the agency stated, “The purportedly vast and allegedly suffocating assertion of regulatory dominance over an entire industry has not occurred, but they complain about that, too.”

Industry experts intervene

Meanwhile, not everyone agrees with the regulator’s methods. Paul Grewal, Coinbase’s head of legal, criticized the agency for what he sees as inconsistent enforcement. In a tweet, he asked why the SEC never classified Ethereum (ETH) and Bitcoin (BTC) as securities.

Ripple’s legal officer, Stuart Alderoty, also chimed in, criticizing SEC Chairman Gary Gensler, who will step down on January 20, 2025, with President-elect Donald Trump planning to replace him with Paul Atkins, a proponent of cryptography. Alderoty accused Gensler of rushing to file the latest 81-page brief before leaving office, describing it as a recycling of “failed arguments.”

Crypto attorney John Deaton added his voice, urging the SEC to reread Howey’s original decision. He emphasized the ruling’s statement that it doesn’t matter if an asset has intrinsic value or if the business is speculative.

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