SEC backtracks on ‘crypto asset securities’ claim in Binance suit

The U.S. Securities and Exchange Commission (SEC) stated in an amended complaint filed against cryptocurrency exchange Binance and its former CEO Changpeng Zhao that it never intended to label cryptocurrencies as securities.

By expanding the Binance case to include three more tokens, the Securities and Exchange Commission has abandoned the “crypto asset securities” claim it has used in numerous enforcement actions against digital asset operators.

Many of the SEC’s lawsuits against entities like Binance and Coinbase have hinged on allegations that these businesses were offering unregistered cryptocurrency securities. The industry has long argued that such an asset class does not exist. The SEC filed documents confirming this position on September 12.

The agency expressed regret for assigning the security label to individual cryptocurrencies and groups of tokens. According to a footnote in the amended complaint, the SEC used the term as shorthand for various aspects of crypto sales.

The SEC has decided to use the term “crypto asset securities” less frequently and apologized for any confusion this may have caused. However, digital asset representatives criticized the admission as too little, too late. Echoing Coinbase CLO Paul Grewal’s comments, Ripple CLO Stuart Alderoty said the SEC’s filing highlights the agency’s misguided approach to regulation.

So is the SEC finally admitting that 1/ “crypto asset security” is a made-up term and 2/ the SEC needs a set of “contract, expectation, and understanding” evidence to prove that a “crypto asset security” is an investment contract?

I think your time has come @SECgov to accept… https://t.co/iJIYTnNvxs picture.twitter.com/E58Pft7irc

— Stuart Alderoty (@s_alderoty) September 13, 2024

Despite the development, the SEC has continued its crypto crackdown, as seen in the updated Binance lawsuit. The latest court filing lists Cosmos (ATOM), Axie Infinity (AXS), and Filecoin (FIL) as unregistered securities.

Shortly before the filing, the SEC also settled its case with eToro, with the firm agreeing to shut down nearly all of its crypto trading. The agency used the term “crypto asset securities” in the settlement.

In other related updates, SEC chairman Gary Gensler was being investigated over allegations that some of his hiring choices were politically motivated. Top GOP lawmakers like Patrick McHenry were part of the investigation into the uptight SEC boss.