Binance, one of the world’s largest cryptocurrency exchanges, has taken steps to dismiss the charges filed against it and its CEO, Changpeng Zhao, by the U.S. Commodity Futures Trading Commission (CFTC). According to Binance’s court filing on July 27, the exchange argued that the CFTC exceeded its jurisdictional authority by bringing charges against entities that do not operate in the United States and individuals who do not reside there.

Separate Roles, Different Entities

Binance further contended that the CFTC failed to differentiate between the various Binance entities involved in the case. Each entity, including Binance Holdings Limited, Binance Holdings (IE) Limited, and Binance Holdings (Services) Limited, has distinct roles within the organization. Despite this, the CFTC referred to all the foreign entities collectively as “Binance.” Binance emphasized that the regulator did not establish personal jurisdiction over each of the named defendants.

Binance Challenges CFTC’s Regulatory Authority

Binance also questioned the CFTC’s authority to regulate spot trading activities, both in the United States and abroad. The exchange argued that the CFTC lacks the regulatory jurisdiction to control such activities, rendering the charges baseless. Binance pointed out that even within the United States, the CFTC’s regulatory authority does not extend to spot trading.

The Novelty of the Case

The seventh count brought by the CFTC accused Binance of willfully evading provisions of the Commodity Exchange Act (CEA) and its regulations. However, Binance argued that the CFTC has never before utilized this claim, demonstrating that it is attempting to test a novel industry and products that did not exist in 2012 when the regulation was formulated. Binance stressed that the CFTC’s inclusion of this claim is unwarranted.

Binance Seeks Dismissal

In light of these arguments, Binance requested the court to dismiss all charges filed by the CFTC. The exchange asserted that the CFTC failed to establish jurisdiction over the defendants, lacked the ability to enforce the provisions cited in the complaint extraterritorially, and neglected to include essential elements of its claims. Binance maintained that the case should be entirely dismissed.

Background of the Lawsuit

The CFTC sued Binance in March, claiming that the exchange violated U.S. derivatives laws by offering its services to U.S. residents without registering. Binance’s response challenges the jurisdiction and regulatory authority of the CFTC, emphasizing that the charges are unfounded based on the specific circumstances of the case.

By taking this legal action, Binance aims to dismiss the charges imposed by the CFTC and ensure that its operations continue unimpeded. The outcome of this lawsuit will have significant implications for the regulation of cryptocurrency exchanges and the enforcement powers of financial regulators.


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