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US Department of Justice Disagrees with SEC’s Classification of BUSD and Stablecoins as Securities
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Key Points
- Recent US DOJ filing challenges SEC’s designation of BUSD stablecoin as securities.
- Binance Holdings and CZ use a US v. Eisenberg lawsuit filing to counter SEC’s claims.
- US DOJ asserts that USDC stablecoin does not qualify as a security under the Howey test.
Binance Vs SEC: Exciting news emerges from the ongoing lawsuit, with Binance Holdings and former CEO Changpeng “CZ” Zhao presenting compelling evidence in the United States v. Eisenberg lawsuit. This evidence could challenge the U.S. SEC’s stance on stablecoins such as BUSD and USDC as securities.
Binance’s Move Against SEC
Binance Holdings and Changpeng Zhao have filed a joint notice of supplemental authority, disputing one of the SEC’s arguments that stablecoins are securities, according to recent court filings.
Binance strategically highlights the United States’ position in the United States v. Eisenberg lawsuit regarding the classification of a stablecoin (USDC) as a security or not. This move holds significant importance in challenging the SEC’s allegations that the stablecoin Binance USD (BUSD) is an unregistered security.
In the case of the $110 million Mango Markets scandal, Avraham Eisenberg was convicted of fraud and market manipulation by the jury. However, information in the US DOJ filing indicates that the USDC stablecoin does not meet the criteria to be classified as a security under the Howey test.
“However, there is no legitimate basis for considering USDC a security or presenting that issue to the jury. An integral aspect of a security is that the holders of the security anticipate profits from other parties’ efforts,” as stated in the DOJ filing.
The U.S. prosecutors further argue that the USDC holders do not anticipate profits. Additionally, there is no grounds for the jury to conclude that USDC is not a security, regardless of maintaining or losing its dollar peg.
Stablecoins Are Not Securities
USDC issuer Circle argues that dollar-backed assets like BUSD and USDC cannot be classified as securities because users do not expect profits from individual transactions. Payment-oriented stablecoins fall outside the SEC’s jurisdiction.
Furthermore, the federal jury convicted Avraham Eisenberg in New York of commodities fraud, commodities market manipulation, and wire fraud, contrary to the SEC’s claims of securities law violations.
Binance may assert that BUSD is not a security, potentially gaining legal clarity and securing a victory in part of the lawsuit. If granted, this decision could signify a significant regulatory milestone.
Recent reports from CoinGape suggest that Binance, BinanceUS, and CEO Changpeng “CZ” Zhao have successfully resolved all discovery and deposition disputes with the US SEC.
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