SEC Seeks to Amend Binance Lawsuit, Avoids Ruling on Solana's Security Status

By: Eliza Bennet

The US Securities and Exchange Commission (SEC) has made a strategic move by requesting permission to amend its ongoing lawsuit against Binance, in an effort to avoid a definitive court ruling on the security status of third-party tokens such as Solana (SOL).

In a joint court filing on July 29, the SEC expressed its intention to alter the terms of its original complaint against the crypto exchange platform Binance. The regulatory body seeks to defer any court ruling regarding the security status of “Third Party Crypto Asset Securities” involved in the case. This proposed change aims to shift the focus away from classifying these digital assets as securities, thus maintaining an element of regulatory ambiguity concerning their legal status.

These third-party coins, which include digital assets issued by entities other than Binance and listed on its platform, have been at the center of SEC's allegations. The SEC had previously accused Binance of violating federal securities laws by listing tokens from various projects, such as Solana, Cardano, Polygon, Cosmos, Filecoin, and Algorand, citing that these tokens met the Howey Test criteria for securities.

Last month, the SEC suffered a setback when a US federal court ruled that the secondary sales of digital assets like Binance's native BNB token do not qualify as securities. This decision has influenced the SEC to reconsider its strategy against third-party tokens, perhaps to avoid similar legal defeats.

Crypto community members on social media have perceived the SEC's recent filing as an indication that digital assets like SOL and ADA may not meet the securities classification and are being unfairly targeted by the agency's regulation-by-enforcement approach.

Binance's Response

Binance has responded by stating that it will not agree to begin the discovery phase until it has fully reviewed the SEC's proposed amended complaint. The firm contended that starting discovery based on potentially amended claims was premature and expressed concerns about the SEC's approach.

“Until Defendants have a set of proposed amended allegations in front of them, it is premature and unreasonable for the SEC to expect them to agree to conduct merits discovery for claims on which the SEC may soon seek leave to amend its allegations,” Binance stated.

Additionally, Binance pointed out that the SEC had only recently revealed its intention to amend the complaint and accused the agency of misrepresenting their agreement regarding the discovery timeline.