SEC Seeks to Modify Lawsuit Against Binance to Avoid Court Decision on Third-Party Token Security Status

The US Securities and Exchange Commission (SEC) is making moves to modify its lawsuit against Binance in order to avoid a court decision on the security status of third-party tokens like Solana. In a joint court filing on July 29, the SEC requested permission to amend its original complaint against the popular crypto trading platform.

The proposed amendment aims to defer any court ruling on the security status of “Third Party Crypto Asset Securities” referenced in the case. If approved, this would effectively remove the SEC from classifying these assets as securities, but they would still face regulatory uncertainty regarding their legal status.

Third-party coins are digital assets issued by entities other than Binance that were listed on its platform. The SEC had previously accused Binance of violating federal securities laws by listing native tokens of Solana, Cardano, Polygon, Cosmos, Filecoin, and Algorand, arguing that these tokens met the criteria for securities under the Howey Test.

However, the SEC faced a setback last month when a US federal court ruled that secondary sales of digital assets like the BNB token do not qualify as securities. This ruling has raised questions about the SEC’s approach to regulating digital assets.

Binance responded to the SEC’s proposed amendment by stating that it would not agree to begin discovery until it had reviewed the amended complaint. The exchange argued that starting discovery on potentially amended claims was premature and criticized the SEC for misrepresenting their agreement on the discovery timeline.

Crypto community members on social media have interpreted the SEC’s filing as a sign that digital assets like SOL and ADA may not qualify as securities and are being unfairly targeted by the agency’s regulation-by-enforcement approach. The outcome of this lawsuit could have significant implications for the classification of digital assets in the US.