Binance, Binance.US, and Changpeng “CZ” Zhao File Joint Response to SEC’s Relying on Wahi Case for Classifying Crypto Tokens as Securities
On March 8, 2023, Binance, Binance.US, and co-founder Changpeng “CZ” Zhao submitted a joint response to the U.S. Securities and Exchange Commission (SEC) regarding their ongoing lawsuit. The defendants argue against the SEC’s reliance on a default judgment in the Coinbase insider trading case, SEC v. Wahi, as a precedent in their case. They assert that the circumstances under which the Wahi judgment was issued and its relevance to the Binance case are unique.
Legal Landscape and Jurisdictional Questions
In their response, the defendants bring attention to the lack of opposition by defendant Sameer Ramani in the Wahi case and the absence of a thorough legal examination of the SEC’s arguments. They also reference the D.C. Circuit’s decision in SEC v. Life Partners, emphasizing the contentious nature of classifying digital assets and questioning the SEC’s approach to this issue.
Amid ongoing debates within the regulatory community, CFTC Commissioner Caroline Pham has criticized the SEC’s broad classification of digital assets as securities. Additionally, the recent revival of a class action lawsuit against Binance and Changpeng Zhao by the Second Circuit Court of Appeals adds another layer to the discussion, raising significant questions about jurisdiction and territorial reach of U.S. securities laws regarding secondary market trading of digital assets.
Implications for the Crypto Industry
The defendants in the Binance case are seeking to dismiss the SEC’s lawsuit, stating that the Wahi case should not serve as a precedent. This stance is supported by Coinbase Chief Legal Officer Paul Grewal, who has publicly declared that the Wahi default judgment does not set a valid precedent for other cases or asserting jurisdiction over the crypto industry.
The ongoing legal battles serve as a reminder of the need for clarity in the regulatory framework governing digital assets. As the industry evolves, the outcomes of these cases could have significant implications for how digital assets are classified and regulated in the future. Binance’s challenge to the SEC’s use of the Wahi case as a precedent underscores the complexities of applying traditional securities laws to the rapidly changing landscape of cryptocurrency and blockchain technology.
