A federal judge has blocked Binance's attempt to force a class-action lawsuit into private arbitration, ruling that claims related to activity before February 20, 2019, must proceed in open court. U.S. District Judge Andrew Carter Jr. of the Southern District of New York held that Binance's 2019 arbitration clause cannot be applied retroactively to bind users who conducted transactions under its 2017 terms of service.
The court's decision centered on the lack of clear notice provided to users. Judge Carter found that Binance relied solely on a general change-of-terms clause and merely posted the updated 2019 terms on its website. There was no evidence the exchange provided individual notice to users or formally announced the significant addition of an arbitration provision and a class-action waiver. The judge emphasized that "online platforms still must follow conventional contract rules" and underscored the necessity for clear agreement, rejecting Binance's argument that its decentralized "new world" branding altered traditional legal analysis.
Furthermore, the court deemed the class-action waiver within the 2019 terms unenforceable. The waiver language was found only in a section heading and lacked operative terms, rendering it ambiguous. The judge ruled that such unclear language cannot be used to limit users' legal rights.
The lawsuit, Williams v. Binance, was originally filed by five investors from California, Nevada, and Texas. They allege that Binance and its founder, Changpeng Zhao, illegally sold unregistered securities on Binance.com and operated as an unregistered broker-dealer. Initially dismissed in 2022, the case was revived by the Second Circuit Court of Appeals in 2024 and sent back to Judge Carter. Following the ruling, a Binance spokesperson stated that plaintiffs had voluntarily dismissed all claims accruing on or after Feb. 20, 2019, and that the company would "vigorously defend the limited claims that remain."
The ruling narrows the litigation path for Binance and sets a precedent that may affect other crypto platforms. It signals that courts will scrutinize whether users received clear notice of material changes to terms, particularly when companies seek to apply arbitration clauses and class-action waivers to prior conduct. The case will now advance in federal court, focusing on whether the tokens sold were unregistered securities and if Binance's early operations violated U.S. registration laws.
