Binance Seeks Dismissal of CFTC Complaint, Alleges Regulatory Overreach

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Binance Seeks Dismissal of CFTC Complaint, Alleges Regulatory Overreach
  • Binance and its CEO Changpeng Zhao filed a motion to dismiss CFTC’s lawsuit.
  • The exchange argues that the CFTC’s complaints are based on regulatory overreach, asking the court to “dismiss the complaint in its entirety.”
  • Key points of Binance’s legal arguments: jurisdiction, extraterritorial claims, specific claims, anti-evasion charge.

Binance Holdings Limited, its related entities, and its CEO, Changpeng Zhao, have filed a motion to dismiss the lawsuit brought against them by the Commodity Futures Trading Commission (CFTC). Binance’s lawyers ask the court to dismiss the case in its entirety. They argue that the CFTC’s complaints are based on regulatory overreach.

There is no dispute that the CFTC has no regulatory authority over spot trading even in the United States, let alone abroad.

Binance, in its motion to dismiss, contends that it is not subject to the CFTC’s jurisdiction since it is an international company based outside the United States and does not operate within the country.

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The legal arguments put forth by Binance and its CEO revolve around several key points. Firstly, they contest the CFTC’s claim of personal jurisdiction over foreign entities and individuals. They argued that the CFTC has failed to establish specific jurisdiction over them.

Secondly, Binance challenges the CFTC’s attempt to extend its regulatory reach beyond the United States through impermissibly extraterritorial claims. They assert that the CFTC’s allegations do not demonstrate the required “direct and significant” connection to the U.S. commerce that would justify the application of CFTC regulations.

Furthermore, Binance contests the specific claims made by the CFTC, citing deficiencies in the pleading of elements required for certain registration categories, such as Futures Commission Merchant (FCM) status. The complaint alleges that Binance.com acted as an intermediary or counterparty, but Binance argues that these claims lack adequate support.

Lastly, Binance challenges a novel anti-evasion charge brought by the CFTC under Rule 1.6 of CFTC regulations. The defendants maintain that this claim is inapplicable to their crypto exchange activities and that the CFTC has never previously tested this provision in this context.

The CFTC alleges that Binance, which offers derivatives trading in cryptocurrencies, violated US law by allowing US residents to trade derivatives products without being registered with the regulatory authority. The lawsuit seeks disgorgement of profits, monetary penalties, and permanent injunctive relief against the exchange.

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