SEC Shifts Stance on Crypto Assets in Binance Case

In a significant development for the cryptocurrency industry, the U.S. Securities and Exchange Commission (SEC) has indicated plans to amend its complaint against Binance, the world’s largest crypto exchange. This move could change how certain digital tokens are classified under securities law.

The SEC filed a lawsuit against Binance and its former CEO, Changpeng Zhao, in 2023. The agency accused the exchange of operating without proper registration and misleading investors. The original complaint named several cryptocurrencies as securities, including Solana (SOL), Cardano (ADA), and Polygon (MATIC).

However, in a recent court filing, the SEC said it wants to change its complaint. This change might remove the need for a court ruling on whether these tokens are securities “at this time.” This shift has caught the attention of many in the crypto world.

Ripple Execs Call Out SEC on Inconsistency

Ripple executives were quick to comment on the SEC’s move. Ripple, which has its own ongoing legal battle with the SEC, criticized the agency’s approach.

Stuart Alderoty, Ripple’s chief legal officer, pointed out the inconsistency in the SEC’s actions. He noted that while the SEC is backing down on calling certain tokens securities in the Binance case, these same tokens are still labeled as securities in a separate lawsuit against Coinbase.

When a judge signals B.S. on the SEC’s claim that 10 tokens on Binance are securities, the SEC says “never mind.” But these tokens are left out to dry in the Coinbase suit. This isn’t how to regulate. https://t.co/xtfLdXWoO8

— Stuart Alderoty (@s_alderoty) July 30, 2024

Ripple CEO Brad Garlinghouse went further, calling the SEC’s actions “hypocrisy.” He argued that SEC Chair Gary Gensler claims the rules are clear, but the agency’s inconsistent application of these rules is causing confusion in the industry.

More evidence of SEC hypocrisy.

Chair Gensler testifies the rules are clear, yet his SEC can’t figure them out and applies them haphazardly, festering more industry confusion.

A political agenda and/or bad faith litigation tactics. Def not a “faithful allegiance to the law”. https://t.co/iX8IdvaW92

— Brad Garlinghouse (@bgarlinghouse) July 30, 2024

The SEC’s potential change in strategy comes after a judge in the Binance case suggested she might not agree with the SEC’s view on these tokens. Rather than risk an unfavorable ruling, the SEC appears to be adjusting its approach.

This development highlights the ongoing debate about how to regulate cryptocurrencies. The SEC has been pushing for stricter oversight, arguing that many digital assets should be treated as securities. However, the crypto industry has pushed back, saying the rules are unclear and unfairly applied.

The SEC’s move in the Binance case could have wider implications. It might signal a shift in how the agency approaches crypto regulation. However, it’s important to note that this change only applies to the Binance case so far. The SEC hasn’t made similar moves in other ongoing lawsuits, like the one against Coinbase.