Binance v. SEC: US DOJ Filing Counters SEC, Stablecoins Are Not Securities

Binance Vs SEC: A significant development has emerged in the lawsuit as Binance Holdings and former CEO Changpeng “CZ” Zhao going to leverage key details in the United States v. Eisenberg lawsuit that could negate the U.S. SEC’s position on stablecoins such as BUSD and USDC as unregistered securities.

This case and the DOJ’s position on USDC being not a security could potentially influence the outcome of Binance’s lawsuit against the SEC.

Binance Leverages DOJ Lawsuit to Prove US SEC Wrong

Defendants Binance Holdings and Changpeng Zhao submitted a joint notice of supplemental authority against one of the SEC’s claims that stablecoins are securities, as per a new court filing.

Binance aimed to bring to the court’s attention the United States’ position in the United States v. Eisenberg lawsuit regarding whether a stablecoin (USDC) is a security or not. This holds a major advantage in countering the SEC’s complaint that stablecoin Binance USD (BUSD) is an unregistered security.

In the $110 million Mango Markets fraud case, the jury found Avraham Eisenberg guilty of fraud and market manipulation. However, an exhibit in the US DOJ filing states that USDC stablecoin is not a security as it doesn’t pass the Howey test.

“But there is no factual basis for treating USDC as a security or putting that question to the jury. A core component of a security is that the holders of the security “expect profits” from the efforts of others,” as per DOJ filing.

The US prosecutors further added that evidence suggests holders of USDC do not expect profits. Also, there is no basis for an instruction for the jury to find that USDC is not a security, even if dollar peg is maintained or lost.

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Binance Vs SEC: Stablecoins Are Not Securities

USDC issuer Circle also argued that assets tied to the dollar such as BUSD and its USDC can’t constitute securities because users don’t expect any profit from standalone purchases. Payment stablecoins fall out of SEC jurisdiction.

Moreover, the federal jury in New York convicted Avraham Eisenberg of commodities fraud, commodities market manipulation, and wire fraud, contrary to the securities law violations charged by the SEC.

Binance could argue that BUSD is not a security, gaining clarity and winning part of the lawsuit. If granted in an order, this will be a major development in terms of regulations.

CoinGape recently reported that Binance, BinanceUS, Changpeng “CZ” Zhao have resolved all discovery and deposition disputes with US SEC.

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