Crypto exchange Binance has countered an SEC filing, arguing that the points presented by the regulator did not apply to the specific conduct it was analyzing.
In a Dec. 12 filing, Binance, its U.S. counterpart Binance.US, and founder Changpeng Zhao have collectively responded to an SEC lawsuit, contending that the SEC did not demonstrate that U.S. customers of the exchanges had entered into contracts that would be considered investment contracts under the Howey Test.
The Howey Test is a legal test used in the U.S. to determine whether a transaction qualifies as an investment contract and is therefore subject to securities laws.
The Binance group also argued that other necessary conditions of the Supreme Court case were not met.
The move is the latest in an ongoing legal saga that began in June when the SEC accused Binance and Binance.US of allowing the public to purchase and trade unregistered securities.
The regulator’s allegations pointed to the listing of certain cryptocurrencies and the provision of a staking service by the exchanges.
Earlier, Binance had resolved various charges with the U.S. Department of Justice (DOJ), Commodity Futures Trading Commission, Office of Foreign Asset Control, and Financial Crimes Enforcement Network.
In September, the exchange sought to dismiss the SEC lawsuit, arguing the regulator was exceeding its jurisdiction.
Dec. 12 filings responded to the SEC’s previous reply to the motion to dismiss.
In them Binance claimed the SEC had not demonstrated any ongoing obligations to users who bought certain cryptocurrencies, implying the absence of an investment contract as defined by the Howey Test.
Binance also countered the SEC’s use of its guilty plea with the DoJ and consent order with FinCEN, as well as Zhao’s DoJ plea, in the ongoing case.
The SEC, however, maintained that these settlements were evidence of Binance’s awareness of its operations in the U.S., serving U.S. customers and using U.S. infrastructure for transactions.
In a separate filing on the same day, Binance argued that securities laws should not be applied in the same manner as the Bank Secrecy Act or International Emergency Economic Powers Act, laws under which Binance and Zhao had previously settled charges.
That filing asserted that these settlements and the consent order do not implicate securities laws:
“That facts in the plea agreements with the Department of Justice show that BHL and Mr. Zhao violated the Bank Secrecy Act (BSA) does not say anything about whether there was fair notice of the SEC’s theory that the crypto assets at issue were securities under the Securities Act or the Exchange Act.”