Overview of Binance’s Legal Challenges
In a recent development, Binance, one of the largest cryptocurrency exchanges, is pushing for a federal judge in the United States to mandate arbitration for all individuals involved in a class-action lawsuit that accuses the platform of selling unregistered securities. This filing, dated May 16, seeks to invoke a clause from Binance’s terms of service that the company asserts was agreed upon by the plaintiffs, which stipulates that users forfeit their right to partake in a class action.
Arbitration Clause and Legal Proceedings
The exchange insists that all claims arising after February 20, 2019, must be arbitrated, even while the court deliberates on claims that occurred before this date.
Binance’s legal argument highlights alterations made to their terms of service in early 2019, introducing the arbitration clause and reinforcing that the earlier terms allowed for amendments without direct notifications to users. Previously, Judge Andrew Carter had partially dismissed Binance’s initial request to forward all claims to arbitration, particularly for transactions involving tokens bought between April 1, 2017, and February 20, 2019. However, claims related to purchases made after February 2019 are still under consideration, with a review pending on how broadly the arbitration clause should be applied.
Growing Legal Troubles
The exchange’s legal troubles in the United States have grown significantly over the past year. Following a lawsuit from the Securities and Exchange Commission (SEC) in mid-2023 for allegedly trading unregistered securities—a case that ended with a settlement of $4.3 billion in November 2023—Binance has faced additional scrutiny. Furthermore, in April 2024, a class action was filed against them in Canada for similar implications after the company’s decision to pull out of the Canadian market in May 2023.
Court Rulings and Future Implications
Previously, in March 2022, a different case had been dismissed by Judge Carter, who sided with Binance’s assertion that it does not fall under the jurisdiction of U.S. securities laws due to the lack of a physical office in the country. However, this ruling was overturned by the U.S. Court of Appeals for the Second Circuit in March 2024, and an appeal to the Supreme Court was subsequently declined in January. As Binance navigates these complicated legal waters, the outcome of this class-action case could have significant implications for its operations in the U.S.
