SEC Lawsuit Against Binance Proceeds, Some Charges Dismissed

U.S. District Court Judge Amy Berman Jackson has allowed the U.S. Securities and Exchange Commission’s (SEC) lawsuit against Binance to move forward. However, certain charges in the case have been dismissed.

The SEC accuses Binance of offering unregistered broker, trading, and clearing services for digital asset securities in the U.S. The court upheld charges related to Binance’s initial coin offering (ICO), ongoing sales for BNB, BNB Vault, and staking services, as well as allegations of failure to register and fraud. However, charges concerning secondary sales of BNB and Simple Earn were dismissed.

Judge Jackson emphasized the evolving nature of tokens, noting that a token initially considered part of an investment contract does not necessarily retain that classification indefinitely.

Just because a token was part of an investment contract in the past, it doesn’t mean it should always be considered a security.

Cody Carbone, chief policy officer at the Digital Chamber, highlighted the court’s clarification on the evolving nature of token classifications. He emphasized the importance of distinguishing between tokens that function as securities and those that do not in today’s marketplace.

The SEC’s approach to crypto regulation has been a subject of debate. Judge Jackson has criticized the agency’s evolving stance and the lack of a comprehensive regulatory framework tailored to the crypto industry.

Meanwhile, the U.S. Treasury Department has moved forward with long-awaited tax regulations targeting cryptocurrency transactions. Under the new rules finalized on June 28, crypto brokers, including exchanges and payment processors, are required to report users’ sales and exchanges of digital assets to the Internal Revenue Service (IRS).

This move, part of the $1 trillion bipartisan 2021 Infrastructure Investment and Jobs Act, aims to tackle tax evasion in the crypto space. The regulations are set to phase in from next year for the 2026 tax season. They are expected to align crypto tax reporting with existing requirements for traditional financial instruments like stocks and bonds.

Treasury officials noted adjustments from the original proposal to ease burdens on brokers and introduce the requirements gradually. Lawrence Zlatkin, VP of Tax at Coinbase, welcomed the finalized regulations and commended the IRS for developing more practical rules focused on custodial brokers like Coinbase. He highlighted improvements in the implementation timeline and measures to prevent duplicate reporting.

Final crypto tax regs are here! We commend the IRS for developing more reasonable, rational rules that focus on custodial brokers. The rules lay out a more practical timeline for implementation and include a provision to prevent reporting duplication.

However, Zlatkin expressed concerns over the absence of a de minimis rule and the inclusion of non-financial transactions, advocating for rules comparable to those for traditional financial brokers. The Treasury’s final rule also includes a provision setting a $10,000 threshold for reporting transactions involving stablecoins.

In a separate development, the Supreme Court has delivered a landmark ruling that curtails the executive branch’s authority to interpret laws, significantly impacting the regulatory powers of federal agencies. The decision, which overturned the long-standing “Chevron deference” doctrine, empowers the judiciary to scrutinize agency actions more closely across various policy domains, including crypto.

Paul Grewal, Coinbase’s chief legal officer, highlighted ongoing legal battles involving regulatory transparency. Grewal criticized the SEC’s tactics, which he described as stonewalling, aimed at hindering Coinbase’s efforts to obtain documents from SEC Chair Gary Gensler as part of their litigation.

Coinbase has requested documents related to Gensler’s communications, arguing that they are crucial to revealing potential due process violations in the SEC’s enforcement actions. This request stems from statements made by Gensler in March 2021, where he indicated the SEC’s limited regulatory authority over digital asset exchanges, a stance Coinbase believes is pertinent to their case against the regulator.

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