SEC Veteran Reacts to Surprising U-Turn in Binance Case: Details

In an X post, Coinbase Chief Legal Officer Paul Grewal draws attention to a footnote in the SEC’s amended complaint filed in the Binance lawsuit.

The footnote reads: “As this court noted and as the SEC reiterates, with its use of the term ‘crypto asset securities,’ the SEC is not referring to the crypto asset itself as the security; rather, as the SEC has consistently maintained since the very first crypto asset Howey case the SEC litigated, the term is a shorthand.”

The SEC continued, “Nevertheless to avoid any confusion, the PAC no longer uses the shorthand term and the SEC regrets any confusion it may have invited in this regard. As the court explained, the crypto asset is the subject of an investment contract. Defendants appear to argue that even if the ten crypto assets were offered and sold as securities during the ICOs, they do not remain securities during the ICOs, they do not remain securities into perpetuity.”

The SEC further noted that “its allegations with respect to the Ten crypto assets at issue in secondary markets are that their promotions and economic realities have not changed in any meaningful way under Howey, such that they continue to be offered and sold as investment contracts.”

Grewal interpreted this footnote to mean that “the SEC regretted any confusion it may have invited by falsely and repeatedly stating that tokens themselves are securities.”

The Coinbase CLO highlighted SEC’s U-turn, noting that the SEC “literally claimed XRP itself is a security in their complaint against Ripple.”

SEC veteran reacts

The take shared by the Coinbase CLO drew the attention of former SEC regional director Marc Fagel, who expressed indifference to the development in the Binance case.

Remember a few weeks ago when the SEC’s plans to move to amend became public, and all of Crypto Twitter (but not me) interpreted it to mean they’d be removing SOL and all the other tokens, from the complaint? Which they haven’t done? Watch out for Crypto Twitter.

— Marc Fagel (@Marc_Fagel) September 13, 2024

Fagel replied to an X user who asked for his thoughts on the take shared by the Coinbase CLO: “Remember a few weeks ago when the SEC’s plans to move to amend became public, and all of Crypto Twitter (but not me) interpreted it to mean they’d be removing SOL and all the other tokens, from the complaint? Which they haven’t done?”

It should be recalled that on July 30, the SEC filed to amend its complaint regarding the “Third Party Crypto Asset Securities” defined in its opposition to Binance’s motion to dismiss. According to the SEC, this removes the need to “issue a ruling as to the sufficiency of the allegations as to those tokens at this time.”

In the Binance lawsuit, the SEC alleged ten cryptocurrencies as securities: BNB, Binance USD (BUSD), Solana (SOL), Cardano (ADA), Polygon (MATIC), Cosmos (ATOM), The Sandbox (SAND), Decentraland (MANA), Axie Infinity (AXS) and COTI (COTI).

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