Binance responded to the allegations levied against it by the US Commodity Futures Trading Commission (CFTC). The world’s leading crypto exchange by transaction volume moved a motion seeking the dismissal of the lawsuit initiated by CFTC.
Binance alleges that CFTC overreached its mandate by inappropriately enforcing laws on its overseas activities. Binance filed the motion vetoed by its chief executive Changpeng Zhao seeking the court to quash the lawsuit.
Binance Accuses CFTC of Overstepping Regulatory Boundaries
A review of the court filings on Thursday July 27 shows Binance’s submission that CFTC is overstepping the regulatory boundaries, thus propagating regulatory overreach. The motion relates to the March lawsuit where the CFTC accused Binance of offering unregistered derivatives. Binance is accused of offering trading services, options, and futures without seeking the requisite regulatory approval.
The regulator alleged that Binance operated without inadequate supervision. CFTC submitted that the know your customer (KYC) and anti-money laundering programs were inadequate. The regulator accuses the Zhao-led crypto exchange of commingling unregistered services, including swap execution facility, futures commissions merchant, and designated contract market.
CFTC Desire to Regulate Activities of Foreign Corporations
Binance attorneys challenge the mandate of CFTC to allege it violated the US domestic laws. The Binance lawyers cited the bedrock principle for all regulators is the awareness that US laws govern domestic affairs and not rule the world. The lawyers reference the court findings in Microsoft Corp. v. AT&T Corp. 550 U.S. 437 (2007) to illustrate CFTC overreach.
The lawyers decried that the CFTC’s decision to file the suit portrayed a desire to regulate the overseas activities of foreign corporations. They added that CFTC is pursuing the Binance executive based on conclusory allegations, unable to establish jurisdiction over the accused. The filing reads that CFTC cannot enforce the provisions annexed to the complaint extraterritorially. Also, the challenge of the failure of CFTC to plead the critical elements in its claims.
Binance’s submission aligns with the previous pronouncement of its global operation, thus terming CFTC overreach in its mandate. Binance parent entity carries Cayman Islands registration though repeatedly failing to name the operational base.
Binance Submits Five Grounds to Dismiss CFTC Complaint
A review of the Thursday filing by Binance cites the absence of personal jurisdiction in CFTC’s complaint. Binance laments that CFTC fails to identify that foreign entities and its chief executive are subject to personal jurisdiction. The filing indicates that the complaint amounts to group pleading and fails to assess the defendant’s contacts in the country individually.
Binance attorneys submitted the extraterritoriality concerns by claiming that CFTC overreached the legal boundaries. In particular, Binance indicates that the CFTC hardly illustrated that the defendants executed domestic transactions.
Binance submits that the accounts levied by CFTC should not claim Binance.com amounts to a domestic board of trade. Also, Binance dismisses the claim that any defendants portrayed operations as the foreign board of trade.
Additionally, Binance argues that CFTC’s complaint fails to satisfactorily indicate instances that Binance.com acted as the intermediary and counterparty. The filing illustrates that no dispute exists that CFTC lacks regulatory authority to oversee spot trading, whether domestically or abroad.
Binance submitted that CFTC allegations portray willful evasion of the Commodity Exchange Act (CEA) provisions. The evasion warrants the outright dismissal of the complaint.
Binance Alleges CFTC Failed in Mandate to Deliver Regulatory Clarity
Binance indicates that CFTC is assessing the anti-evasion claim against the products that emerged after the regulation’s promulgation in 2012. Binance echoed the submission by Coinbase and Bittrex that CFTC failed to offer the requisite guidance. The authority’s failure contributed to the regulatory uncertainty.
Binance establishment in 2017 coincided with the infancy period of the crypto industry. The crypto exchange submits that no regulatory guidance was existing. The filing discloses that the intervening years of the US regulatory agencies have yielded no guidance for digital assets.
Binance’s filing indicates that the intervening years failed to clarify matters. Instead, the move subjected the digital assets operators to endless tug-of-war with the Securities and Exchange Commission and CFTC regarding regulation and enforcement.