• Binance and CZ dispute SEC’s claim, saying SEC hasn’t proven an “investment contract” under the Howey Test.

• Binance argues its settlements with regulatory bodies don’t implicate securities laws, challenging the SEC’s jurisdiction.

Binance, Binance.US, and their founder, Changpeng Zhao (CZ), have strongly countered allegations made by the U.S. Securities and Exchange Commission (SEC). The SEC had filed a lawsuit in June, accusing the entities of allowing the trading of unregistered securities.  In response, Binance and CZ accused the SEC of failing to meet the standards of the ‘Howey Test,’ which is a crucial evaluation in determining the legitimacy of an investment contract.

The United States Supreme Court created the “Howey Test,” a legal framework that helps assess whether a given arrangement counts as an investment contract. According to the Howey Test, an investment contract is a situation where an individual invests money in a joint venture with the sole expectation of earning profits from the efforts of others. Binance and CZ sharply criticized the SEC for not presenting enough proof of the existence of an investment contract.

One of the main points made by Binance and Binance.US is that platform users are not subject to any contracts after they buy certain cryptocurrencies. They argue that there needs to be some degree of dependence on other people’s efforts for an investment contract to exist. They contend that, in this instance, customers were not bound by any commitments that would qualify as investment contracts, as required by the Howey Test.

Challenging SEC’s Jurisdiction Claims

The SEC cited the U.S. Department of Justice (DOJ) settlement and consent orders that Binance signed with other regulatory agencies as proof that the exchange was aware of its activities in the country. Binance and CZ have refuted these allegations, claiming that securities laws do not cover the SEC’s allegations due to the jurisdictional confessions made under the Bank Secrecy Act (BSA).

According to Binance, the settlements and consent orders related to the BSA and other regulatory matters do not implicate securities laws. They contend that the SEC’s theory that the crypto assets were securities under the Securities or Exchange Act lacks a solid foundation.

This legal dispute has evolved into a complex battle of legal interpretations and regulatory jurisdictions. Binance and CZ’s legal team has consistently argued that the SEC’s allegations exceed the regulator’s authority. This mirrors similar arguments made by Binance earlier in the year when it sought to dismiss a separate suit by the Commodity Futures Trading Commission (CFTC).

However, the SEC claims that Binance knew of its activities in the US because of the settlements and consent orders. According to the regulator, these agreements show that the exchange used American infrastructure for transactions and aggressively served American customers.

BNB’s Resilience Amid Legal Challenges

Binance’s native cryptocurrency, Binance Coin (BNB), has proven remarkably resilient while managing these legal issues. The exchange settled with regulatory organizations for $4.3 billion, although BNB still consistently reports gains for its holders.

Notably, beginning December 5, 2023, BNB’s social dominance—a measure of its relevance and adoption among market participants—has increased. This indicator shows how much the public still cares about and supports BNB. It is worth noting that BNB has increased by 1.15% in the last 24 hours and is currently trading at $254.76 as of press.