In a landmark development for the cryptocurrency industry, the U.S. Securities and Exchange Commission (SEC) has formally dismissed its civil lawsuit against Binance, the world’s largest cryptocurrency exchange, and its founder Changpeng Zhao.
Filed in 2023, the lawsuit accused Binance of operating an unregistered exchange, misleading regulators, and facilitating the trading of unregistered securities.
The dismissal, finalized in May 2025, was a joint decision by both the SEC and Binance, marking a significant shift in the regulatory landscape for digital assets.
Legal Background and Prior Settlements
The SEC’s initial lawsuit alleged that Binance and Zhao engaged in various illegal activities, including manipulating trading volumes and misusing customer funds.
In a separate legal matter, Binance had previously settled with the Department of Justice (DOJ) and the Commodity Futures Trading Commission (CFTC) in November 2023, agreeing to pay a $4.3 billion fine for violations related to anti-money laundering laws.
As part of that settlement, Zhao stepped down from his role, paid a $50 million personal fine, and served four months in prison.
Judicial Rulings and Regulatory Shifts
The dismissal of the SEC’s lawsuit follows a series of judicial decisions that have favored Binance.
In June 2024, U.S. District Judge Amy Berman Jackson dismissed claims that Binance’s BNB token and its stablecoin, BUSD, constituted unregistered securities.
Judge Jackson cited the Supreme Court’s Howey Test, emphasizing that secondary market sales of these tokens did not meet the criteria for securities transactions.
This ruling aligned with the earlier decision in SEC v. Ripple, where Judge Analisa Torres concluded that XRP’s secondary market sales were not securities.
The SEC’s decision to drop the lawsuit reflects a broader regulatory shift under the Trump administration.
President Donald Trump appointed Paul Atkins, a pro-crypto advocate, as SEC Chairman, signaling a move toward a more innovation-friendly regulatory environment.
This approach contrasts with the previous administration’s stricter stance on cryptocurrency regulation.
Industry Reactions and Market Impact
The dismissal has been hailed as a significant victory for the cryptocurrency industry.
Binance welcomed the decision, crediting SEC Chairman Paul Atkins and the Trump administration for fostering a regulatory environment conducive to innovation.
The move has also been seen as part of a broader trend, with the House of Representatives introducing the Digital Asset Market Clarity (CLARITY) Act to establish a clear U.S. regulatory framework for digital assets.
Despite the positive regulatory developments, the cryptocurrency market experienced a downturn following the announcement.
Bitcoin’s price declined by 2.3% to $105,935, retreating from its recent record high of over $111,000.
Other major cryptocurrencies, including Ether, XRP, and Solana, also saw declines, indicating that market reactions can be complex and multifaceted.
Conclusion
The SEC’s dismissal of its lawsuit against Binance marks a pivotal moment in the evolving landscape of cryptocurrency regulation in the United States.
It reflects a shift toward a more balanced approach that considers both investor protection and the need to foster innovation in the digital asset sector.
As regulatory frameworks continue to develop, the industry anticipates clearer guidelines that will provide greater certainty and stability for market participants.
Sources:
- Reuters – SEC Dismisses Lawsuit Against Binance
- Axios – SEC Drops Suit Against Binance
- Wall Street Journal – SEC Dismisses Lawsuit Against Binance
- Barron’s – Bitcoin Price Falls After Regulatory News
- FXStreet – Judge Dismisses Part of SEC Case Against Binance
Changpeng Zhao Co-founder-CEO-Binance-by-websummit
