The CFTC sued Binance, and the exchange filed a motion to dismiss, citing regulatory overreach. The CFTC is suing Binance and its CEO Changpeng “CZ” Zhao. Binance argues it doesn’t operate in the U.S. and Zhao is not a U.S. resident.
The brief emphasizes that the first six charges don’t apply to overseas activity. It also points out that some charges don’t meet statutory requirements. The motion contests the seventh claim accusing Binance of evading the Commodity Exchange Act. It argues that the CFTC doesn’t meet the requirements for the charge.
The request to dismiss states that the CFTC lacks regulatory jurisdiction over spot trading. This applies both domestically and internationally. The main question is whether Binance became subject to registration and compliance provisions. This occurred when it expanded product offerings after off-boarding potential U.S. users in 2019.
Despite a multi-year inquiry and 236 paragraphs of charges in the CFTC’s complaint, during which Binance freely gave a wealth of information, the exchange contends that the action is doomed from the start.
CFTC Legal Action Adds to Binance’s Growing Legal Problems in the US
In March, the CFTC took legal action against Binance. The claim accused the exchange of offering unregistered derivatives in the US, such as futures, options, and cryptocurrency trading services. The regulator alleged that Binance didn’t register as a designated contract market, swap execution facility, or futures commissions merchant. It also accused the exchange of lacking a suitable know-your-customer or anti-money laundering program.
The CFTC action is only the beginning of Binance’s legal problems in the United States. The Securities and Exchange Commission (SEC), which launched its case against the exchange last month, is now suing the exchange.
These legal disputes highlight the increased regulatory scrutiny cryptocurrency exchanges and platforms face and pose substantial obstacles to Binance’s activities in the United States. Regulatory compliance and dealing with jurisdictional complications will remain top priorities for international firms in the field as the crypto industry develops. The results of these actions might have larger repercussions for the legal framework governing cryptocurrencies in the United States and elsewhere. Stakeholders in the industry will be keenly monitoring the progress of these legal procedures.