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- The court dismissed the SEC’s bid to classify BNB sales on secondary markets as securities.
- Ruling highlights need to consider transaction specifics and context in securities classification.
The US Securities and Exchange Commission (SEC) suffered a major setback in its attempt to categorize as securities the sales of Binance USD (BUSD) stablecoin and its native token, BNB, on secondary markets.
Referring to the 2023 decision in the SEC v. Ripple Labs case, Judge Amy Berman Jackson signed a court document on June 28 dismissing the SEC’s allegations.
Legal Precedents Influence Ruling
Judge Jackson emphasized that the totality of the circumstances and the economic realities of each transaction determine whether or not a secondary market sale qualifies as an investment contract, echoing Judge Analisa Torres’ reasoning in the Ripple case.
The SEC had maintained that since BNB was first offered as an investment contract, any sales after that had to be considered securities as well.
The particulars and context of each secondary transaction must be taken into account; the court judged this reasoning to be unpersuasive. Basically, BNB tokens are not securities throughout their lifetime only because they were first offered as investment contracts.
Challenges to the SEC Stance
The Howey test requires more specific evidence to legitimately assert an expectation of profits from secondary sales, the court said, pointing out contradictions in the SEC’s strategy.
Van Buren Capital general partner Scott Johnsson called the judgment a “big loss” for the SEC, while cryptocurrency-focused lawyer James “MetaLawMan” Murphy praised it as “a win for the greater crypto industry.”
Wow, big loss for the SEC in Binance re: secondary sales. I was expecting this type of analysis from Failla, but Berman seems to have given it instead. pic.twitter.com/5vPPew4WLl
— Scott Johnsson (@SGJohnsson) June 29, 2024
The SEC has charged cryptocurrency exchanges like Kraken and Coinbase with dealing crypto assets deemed unregistered securities, and this decision may have wider ramifications. The court’s rejection of the SEC’s contention about BNB secondary sales may set a standard that affects these matters.
In its larger case against Binance, the court supported the SEC even if it dismissed its argument about secondary market sales. The SEC can carry on looking into Binance’s staking program, the sale of BNB tokens after their initial coin offering (ICO), and possible anti-fraud infractions.
Meanwhile, as of writing, BNB Coin is valued at about $568.64, having slightly decreased by 0.09% over the last 24 hours, according to CoinGecko.
Furthermore, the efficiency and appeal of the network have been greatly increased by the up to 90% reduction in transaction costs brought about by recent enhancements to the BNB Chain, as previously reported by CNF.
