SEC Suffers Setback as Judge Rules Binance’s BNB Secondary Sales Not Securities

• District Judge Amy Jackson dismissed the SEC’s claim that secondary sales of BNB tokens qualify as securities.
• The ruling argued that the nature of tokens can change over time.
• Judge Jackson criticized the SEC’s lack of a comprehensive regulatory approach.

A federal judge has rejected the U.S. Securities and Exchange Commission’s claim that secondary market sales of Binance’s BNB token constitute securities, delivering a significant win for the cryptocurrency exchange and providing clarity on the regulatory status of digital assets.

Judge Amy Berman Jackson of the U.S. Court for the District of Columbia rejected the SEC’s arguments that secondary market transactions of Binance’s BNB token met the criteria for securities as defined by the Howey Test.

The decision aligns with Judge Analisa Torres’ opinion in the Ripple lawsuit, which emphasized the importance of the economic reality of token transactions when applying the Howey Test. In her ruling, Judge Jackson highlighted the SEC’s encroaching stance on crypto regulations and criticized the agency for not adopting a comprehensive approach specific to the industry.

Judge Jackson ruled that the nature of tokens can change over time. She rejected the notion that a token, once classified as a security, must always remain so. Judge Jackson contended that the Howey framework does not support the idea that an asset involved in an investment contract remains a “security” when traded by individuals across exchanges and used in various ways.

The judge believes this deviation leaves the court, the industry, and future buyers and sellers without a clear principle to differentiate between security tokens and non-security tokens. FOX correspondent Eleanor Terrett posted on X (formerly Twitter) about Judge Jackson’s position on the SEC’s approach to crypto regulation.

The SEC argued that the inherent technology and interdependence of the platform and token performance should automatically classify secondary sales of BNB as investment contracts. However, Judge Jackson disagreed with this position.

Judge Jackson, in rejecting the SEC’s argument, clarified that the determination of whether a particular transaction constitutes an investment contract requires a more nuanced analysis than simply asserting that all crypto assets fall under that category. She emphasized that secondary sales of BNB did not meet the criteria for such a classification.

Building upon this nuanced analysis, Judge Jackson further noted an inconsistency in the SEC’s stance. While the agency claimed to be targeting investment contracts, not the coins themselves, their argument regarding secondary sales of BNB suggested otherwise.

The implications of Judge Jackson’s ruling, particularly her emphasis on a nuanced approach and her identification of inconsistencies in the SEC’s stance, are not lost on crypto commentators. Many see this decision as a landmark victory that could significantly influence how digital assets are classified and regulated in the future, especially with regard to secondary market transactions.