A US Federal Judge has rejected several claims made by the Securities and Exchange Commission (SEC) against Binance, which is seen as setting the stage for a token regulation model.
Judge Amy Berman Jackson of the US District Court for the District of Columbia ruled that the SEC failed to allege facts indicating that secondary market sales of Binance’s exchange token BNB on crypto exchanges were securities transactions, the cryptocurrency exchange said in a blog post on Tuesday.
The court also rejected the SEC’s argument that Binance’s fiat-backed stablecoin BUSD is classified as an investment contract, Binance added.
The court allowed some of the SEC’s claims to proceed, including its claim that direct sales of BNB are securities transactions because the court must assume that the allegations are true at this stage of the proceedings.
But Binance said it expects the SEC will face “significant challenges” in proving these claims.
“This decision is a positive step towards safeguarding the integrity of the crypto market and calls for fair and consistent regulation so as not to stifle growth and innovation,” Binance said in the blog post.
“As this case proceeds, Binance remains steadfast in its commitment to defend against the SEC's overzealous and ill-conceived attempts to regulate nearly the entire cryptocurrency market.”
Tim Kravchunovsky, CEO of decentralized telecommunications network Chirp, sees Binance’s legal win paving the way for a token regulation model that would encompass the entire decentralized ecosystem.
“But regulators need to go much deeper to create rules for the increasingly complex decentralized finance ecosystem,” he noted.
He highlighted that while the ruling is a “big win” in terms of clarity for the crypto industry at large, it fails to provide enough clarity for DePIN projects, as DePIN tokens “fundamentally differ from tokens like BNB.
"Unlike BNB, DePIN tokens are integral to the operational and governance structures of physical infrastructure networks and are typically paid out as rewards to users only after network-critical work has been completed," he explanined and said that as such, DePIN requires a much more complex set of rules.
“But what this ruling has achieved is setting the stage for a token regulation model that is as complex and adaptive as decentralized physical infrastructure networks themselves,” Kravchunovsky said.
“The framework for DePIN tokens needs to expand on the different phases of token utilization and provide an underlying method from systems engineering and complex adaptive systems modeling.”
Kravchunovsky concluded: “It’s exciting to see just a hint at a future where token regulation is more tailored to reflect the unique characteristics and functions of different types of tokens within this fast-changing landscape.”