The situation continues to get crazier and crazier in the crypto world.
The Securities and Exchange Commission (SEC) has thrown a legal curveball at Binance Holdings Limited, refusing to let them off the hook in a lawsuit and claiming broad control over crypto exchanges. The battleground? The SEC’s saying they can regulate exchanges by calling digital assets securities.
Paul Grewal, Chief Legal Officer at Coinbase, took the mic on Twitter to break down the SEC’s stance. In a bunch of tweets, he pointed out flaws in the SEC’s argument, saying they’re going too far without a solid legal foundation.
Read on for more details.
Binance’s ICO Adventure
Back in 2017, binance 
binance [email protected] Centralised Exchange 
, led by Cchangpeng zhao 
changpeng zhao founder and ceo at Binance Changpeng Zhao is the Founder and Chief Executive Officer at Binance.His contribution to the enhancement of Binance made the platform world’s largest cryptocurrency exchange since its inception in 2017. Zhao launched the blockchain network Binance Smart Chain which has made a remarkable contribution to the development of the decentralized finance ecosystem. Whereas in 2019, he launched Binance’s US affiliate, Binance.US.
He is commonly known as CZ, a Chinese-Canadian Business Executive who has been ranked 113th richest in the globe as of 2022. In the past, he founded Fusion Systems, a trading system for brokers famous for some of the fastest high-frequency trading systems for brokers. Zhao has served as a member of the team that developed Blockchain.info and played the role of Chief Technology Officer of OKCoin, a secure cryptocurrency exchange platform for Bitcoin, Ethereum, Dogecoin, and other crypto assets. EntrepreneurInvestorChief Executive Officer , launched an Initial Coin Offering (ICO) for its token, BNB, setting up the Binance.com platform. The SEC’s beef? They’re saying Binance lured in U.S. investors, dodging rules, and maybe pulling a fast one on investors through Binance.US.
The SEC’s real problem is how they read “investment contracts” in the Howey Test, a rule from the Supreme Court. Normally, it needs a contract for a business venture’s profit. But the SEC says it’s more flexible, not needing a contract or a legally enforceable right. Grewal and the crypto gang aren’t buying it.
Also Read – SEC vs. Binance: Legal Showdown Intensifies Over Howey Test
Why is the law so confusing?
Grewal’s tweets suggest that the SEC’s argument presents a paradox in handling cases involving contractual obligations, specifically when claiming that the Howey precedent does not mandate such requirements. The SEC’s statements seemingly separate Bitcoin (BTC) and Ethereum (ETH) from the discussion, inadvertently questioning their status as securities.
The SEC’s paper says everything Binance does—staking programs, selling BNB and BUSD—falls under investment contracts. They don’t buy Binance’s claim that these are just “ordinary assets” and take issue with the company’s what-ifs.
Read More: Binance Lawsuit Dismissal Request Rejected By SEC; What Next?
Furthermore, the SEC’s memorandum touches on the Major Questions Doctrine, which deals with the agency’s enforcement of congressional enactments, stating that this legal principle does not apply to crypto as Binance suggests.
Once Again – This is a Call for Clarity!
Grewal’s closing tweet presses the need for comprehensive legislation to “put an end to these distortions,” a sentiment echoed by industry advocates seeking to navigate the complex world of cryptocurrency law.
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