Binance, the world's largest cryptocurrency exchange, has filed a motion in a U.S. federal court requesting dismissal of a class action lawsuit brought by American investors. The suit accuses Binance of violating securities laws by offering and promoting unregistered crypto tokens. Binance's legal team argues that a binding arbitration clause within its user terms of service, effective from February 20, 2019, requires disputes to be resolved privately through arbitration rather than in court.
The lawsuit, initially filed in April 2020, alleges Binance facilitated sales of crypto tokens that should have been registered as securities but were not, thus violating regulations. After initial dismissal in 2022 citing Binance’s offshore status, the case was revived in March 2024 by the Second Circuit Court of Appeals. This allowed the lawsuit to proceed based on sufficient allegations of domestic transactions.
Binance stresses that users accepted the arbitration clause upon account registration, which also includes a class-action waiver. The clause mandates that all claims arising after February 20, 2019, must be subject to binding arbitration governed by the Hong Kong International Arbitration Centre. Binance’s motion comes amid ongoing regulatory and legal pressures on the exchange, including a $4.3 billion U.S. settlement in 2023 and a guilty plea by former CEO Changpeng Zhao related to anti-money laundering laws.
If the court enforces arbitration, the class action would move out of public court proceedings, potentially limiting transparency about Binance’s practices regarding token listings and compliance. If denied, the case may continue through traditional litigation, likely exposing more details via discovery and trial. This legal development highlights the complex regulatory environment cryptocurrencies face in the U.S. and could set precedence for handling future disputes with crypto platforms.