The SEC has retracted its request for a court ruling to classify tokens such as Solana, Cardano, Polygon, and others as securities.
The SEC’s Change of Heart
The United States Securities and Exchange Commission (SEC) is no longer asking a court to decide and deem the tokens named in its lawsuit against the crypto exchange Binance as securities. On July 30, 2024, the SEC filed a response to the court’s minute order from July 9, 2024. In this filing, the SEC stated it seeks to amend its complaint regarding the “Third Party Crypto Asset Securities” mentioned in its opposition to Binance’s motion to dismiss.
Why the SEC Changed Its Request
According to the SEC, this change removes the need to “issue a ruling as to the sufficiency of the allegations as to those tokens at this time.” This means the government agency no longer asks the court to decide whether the affected tokens are securities.
Which Tokens are Affected?
In its suit against Binance, the SEC claimed several tokens were securities. The list includes:
- Binance Coin (BNB)
- Binance USD (BUSD)
- Solana (SOL)
- Cardano (ADA)
- Polygon (MATIC)
- Cosmos (ATOM)
- The Sandbox (SAND)
- Decentraland (MANA)
- Axie Infinity (AXS)
- Coti (COTI)
These tokens are part of a larger list that the SEC believes to be securities. In June 2023, the SEC claimed at least 68 tokens were securities, impacting more than $100 billion worth of cryptocurrencies in the market.
Political Support for Crypto
On the other side of the political spectrum, views on crypto are also beginning to shift. On July 27, Democratic Party members of the US House of Representatives signed a letter calling for the party to take a “forward-looking approach” to blockchain and digital assets. In response to the letter, advisers of presidential candidate and incumbent Vice President Kamala Harris contacted crypto companies to repair the party’s ties to the crypto industry.
The SEC v. Binance Case
The case SEC v. Binance Holdings Limited, BAM Trading Services Inc., BAM Management US Holdings Inc., and Changpeng Zhao (Case No. 1-23-cv-01599-ABJ) is being deliberated in the United States District Court for the District of Columbia. The SEC and the defendants submitted a joint response following a Minute Order issued by the court on July 9, 2024. This response details the respective positions of the parties regarding the SEC’s proposed amendments to the complaint and the scheduling of related motions and discovery.
The SEC’s Proposal
The SEC’s proposal outlines its intention to seek leave to amend its complaint, particularly regarding the “Third Party Crypto Asset Securities,” thus avoiding the need for an immediate court ruling on those allegations. The SEC proposes a detailed schedule for the submission and response to the motion to amend. The SEC also requests that discovery commence on the claims that have already been upheld by the court, arguing that these claims are independent of any new allegations in the proposed amended complaint.
The Defendants’ Opposition
The defendants, including BAM Management US Holdings Inc., BAM Trading Services Inc., Binance Holdings Limited, and Changpeng Zhao, oppose the immediate commencement of discovery. They argue that discovery should not begin until they have reviewed the SEC’s proposed amended complaint. The defendants propose a similar schedule for briefing and responding to the motion to amend but insist on deferring discovery discussions until after the SEC files its amended complaint.
SEC’s Argument for Immediate Discovery
The SEC emphasizes that the court has already sustained several of its claims, and therefore, it is reasonable to begin discovery on those claims immediately. The SEC argues that waiting for the amended complaint to initiate discovery would unnecessarily delay the proceedings. The SEC suggests that any additional discovery required for new allegations can be addressed later if those allegations survive further motions.
Defendants’ Counterarguments
The defendants counter that they were only informed about the SEC’s intention to amend the complaint late in the process. They argue that it is premature to start discovery without knowing the specifics of the SEC’s proposed amendments. The defendants’ proposal includes meeting and conferring to discuss the discovery plan after the SEC files its motion to amend, ensuring a more informed and efficient process.
The Court’s Decision
The court is asked to consider these competing proposals and decide on the appropriate schedule for amending the complaint, subsequent motions, and the commencement of discovery. Both parties aim to ensure a fair and efficient resolution of the case, but they differ on the timing and sequence of these critical procedural steps.
In summary, the case involves the SEC seeking to amend its complaint against Binance and its associated entities, with both parties proposing different timelines for motions and discovery. The SEC wants immediate discovery on upheld claims, while the defendants want to review the amended complaint before starting discovery. The court’s decision on these proposals will shape the next phase of the litigation.
The Bigger Picture
The SEC’s decision to back down from claiming certain tokens as securities is part of a larger debate about how cryptocurrencies should be regulated. This issue affects not just the tokens named in the Binance suit, but the entire crypto market. The SEC has been trying to classify many tokens as securities to bring them under its regulatory framework. However, this approach has faced significant pushback from the crypto industry, which argues that such regulation would stifle innovation and harm the market.
Impact on the Crypto Market
The SEC’s lawsuit against Binance and its stance on various tokens being securities have caused uncertainty in the crypto market. Investors and companies are closely watching the case to see how it will affect the classification of tokens and the broader regulatory environment. The SEC’s change in approach might ease some of this uncertainty, but the issue is far from resolved.
Future of Crypto Regulation
The future of crypto regulation in the US is still up in the air. With presidential candidates showing different levels of support for the crypto industry, the outcome of the next election could significantly influence how cryptocurrencies are regulated. The SEC’s actions, court decisions, and political developments will all play crucial roles in shaping the future of the crypto market.
Key Takeaways
- The SEC has retracted its request for a court ruling to classify certain tokens, including Solana (SOL), Cardano (ADA), and Polygon (MATIC), as securities.
- The SEC’s lawsuit against Binance is ongoing, with both parties proposing different schedules for amending the complaint and starting discovery.
- Presidential candidates are showing increased interest in the crypto industry, with some pledging to change current regulatory approaches.
- The future of crypto regulation in the US remains uncertain, influenced by legal, political, and market developments.
This article covered the SEC’s change in approach regarding the classification of certain crypto tokens, the ongoing lawsuit against Binance, and the broader context of crypto regulation in the US. It also highlighted the political dynamics that could shape the future of the crypto industry. As the case unfolds and the political landscape evolves, the crypto community will be watching closely to see how these developments impact the market and regulatory environment.
