Cryptocurrencies and secondary sales of the BNB token do not constitute securities, a federal court ruled in another significant victory for the crypto industry.

Cryptocurrencies and secondary sales of Binance Coin (BNB) do not constitute securities offerings, according to a United States federal court ruling by Judge Amy Berman Jackson.

In a significant win for Binance.US, the judge dismissed several claims made by the United States Securities and Exchange Commission (SEC), according to a July 2 announcement by Binance:

“The court held that the SEC failed to plead that purchasers in secondary market sales acquired BNB with an expectation of profits, rather than for other uses, which is a key criterion for passing the Howey test (a legal framework outlined by the Supreme Court to determine whether a transaction qualifies as an investment contract).”

The SEC started cracking down on crypto exchanges after the collapse of FTX, to avoid a similar meltdown. However, the regulator’s approach has been widely criticized for potentially stifling innovation.

The ruling could have positive implications for other ongoing legal battles, like the Ripple vs SEC lawsuit.

Cryptos are not securities

In a major win for the crypto industry, Judge Jackson ruled that crypto tokens themselves are not securities.

According to the ruling, this means that cryptocurrencies are not investment contracts that fall under the purview of the SEC, according to the announcement:

“The court found that the SEC’s approach muddied the issues and ignored controlling United States Supreme Court precedent. The court also emphasized that the focus should be on whether the circumstances surrounding each transaction render it a securities transaction.”

The judge further ruled that the focus should be on the circumstances of each token sale, not the cryptos themselves, which are not considered securities.

The ruling comes as a sign of relief for investors, as the SEC previously said that 68 cryptocurrencies are securities, after introducing Binance’s BNB coin to the list, along with nine other cryptos in June 2023, during its lawsuits against Binance and Coinbase.

Binance vs SEC

In June 2023, the SEC sued Binance and Coinbase exchange for alleged securities violations. In the lawsuit against Binance, the SEC alleged that the company and its founder, Changpeng Zhao, had misappropriated billions of user funds.

Despite no evidence of user fund misappropriation, Binance was charged with violating Anti-Money Laundering laws and settled to pay one of the most significant criminal fines in history worth $4.3 billion.

The next court hearing for the Binance.US vs SEC case is scheduled for July 9.

The U.S. wing of the world’s largest exchange has expressed readiness for an extended period of legal discovery. It said in a June 2 X post:

“On Friday, the Court decided that the SEC’s case against Binance.US will continue. We were prepared for this and look forward to having this case move forward in the judicial process.”