SEC Moves to Amend Complaint in Binance Lawsuit, Acknowledges 10 Tokens Not Securities

• The US SEC has filed a motion to modify its original complaint concerning “crypto asset securities” in its lawsuit against Binance.
• The agency acknowledges a misstep in labeling certain tokens as securities.
• Coinbase CLO Paul Grewal highlighted that the SEC plans to challenge securities allegations against these tokens continuously.

The US SEC seeks to amend its complaint in the ongoing lawsuit against Binance, potentially reshaping how crypto assets are regulated.

US SEC Files Motion to Amend Complaint in Binance Case

In a significant move, the U.S. Securities and Exchange Commission (SEC) has filed a motion for leave to amend its original complaint in the ongoing lawsuit against Binance, Binance.US, and its co-founder Changpeng Zhao. This filing comes amidst a backdrop of increased regulatory scrutiny following a ruling in a separate case involving Kraken. The SEC admits to having inaccurately termed 10 tokens as “crypto asset securities,” a designation it now seeks to correct.

Regulator’s Acknowledgement and Actions

The SEC’s proposed amended complaint (PAC) includes a redline version comparing it with the original. This step underscores the regulator’s commitment to precision as it actively shapes the legal landscape for the cryptocurrency market. By October 11, Binance is required to respond to this request, either by opposing or consenting to the proposed amendments. This move indicates the SEC’s persistence in its regulation-through-enforcement strategy, which has significant implications for the crypto industry.

Paul Grewal’s Reaction and Industry Insight

Paul Grewal, Chief Legal Officer at Coinbase, responded to the SEC’s filing through a social media post. Grewal drew attention to a footnote in the proposed complaint, highlighting the SEC’s retraction regarding the earlier mischaracterization of 10 specific tokens, such as SOL, ADA, and MATIC, as securities. This marks a critical point in the ongoing legal discourse, indicating a possible shift in the SEC’s approach or a clarification of its position on what defines a “crypto asset security.”

Implications for Ripple and Other Crypto Assets

Paul Grewal also referenced Ripple’s Chief Legal Officer, Stuart Alderoty, pointing out a change in the SEC’s terminology concerning the legal status of crypto assets. The regulator had previously lumped tokens like ETH under its scrutiny but seems to have refined its stance. Despite this clarification, the SEC is set on continuing to allege that these tokens are sold as investment contracts in secondary markets. This approach maintains the agency’s tight grip on the regulatory aspects of the crypto world and will likely shape future industry practices and compliance requirements.

Conclusion

The amendment to the SEC’s complaint against Binance signifies not just a legal rectification but a strategic maneuver in its broader regulatory game plan. The agency’s reconsideration of labeling 10 tokens as securities, and its commitment to enforce rules around investment contracts, highlights an evolving regulatory landscape. For industry players and investors, this development serves as a critical touchpoint, indicating the complexity and the heightened scrutiny that will continue to define the crypto asset market.