SEC seeks to amend Binance lawsuit to avoid ruling on SOL’s security status SEC seeks to amend Binance lawsuit to avoid ruling on SOL’s security status
SEC's proposed amendments could leave regulatory status of Solana's SOL and other tokens unresolved.
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Updated: Jul. 30, 2024 at 12:33 pm UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
The US Securities and Exchange Commission (SEC) is seeking to modify its ongoing lawsuit against Binance to avoid a court decision on the security status of third-party tokens like Solana.
In a joint July 29 court filing, the SEC requested permission to amend its original complaint against the crypto trading platform, stating that it aims to avoid a court ruling on the “Third Party Crypto Asset Securities” referenced in the case.
The proposed amendment seeks to defer any court ruling on these tokens’ security status. If granted, it would effectively remove the SEC from classifying these assets as securities, but they would remain subject to regulatory uncertainty regarding their legal status.
Third-party coins are digital assets issued by entities other than Binance that were listed on its platform. Last year, the SEC accused Binance of breaching federal securities laws by listing native tokens of Solana, Cardano, Polygon, Cosmos, Filecoin, and Algorand, arguing that these tokens met the Howey Test criteria for securities.
However, the SEC’s case encountered a setback last month when a US federal court ruled that the secondary sales of digital assets like the BNB token do not qualify as securities.
Meanwhile, crypto community members on social media have interpreted the SEC’s filing as further indications that digital assets like SOL and ADA do not qualify as securities and are unfairly targeted by the financial watchdog’s regulation-by-enforcement approach.
Binance’s response to the SEC
In response, Binance stated it would not agree to begin discovery until it had reviewed the SEC’s proposed amended complaint. The firm argued that starting discovery on potentially amended claims was premature.
It stated:
“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.”
The exchange also noted that the SEC had only recently disclosed the amendment proposal and accused the agency of misrepresenting their agreement on the discovery timeline.
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Oluwapelumi Adejumo
Oluwapelumi values Bitcoin's potential. He imparts insights on a range of topics like DeFi, hacks, mining and culture, underlining transformative power.
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