Crypto exchange Binance and its CEO Changpeng “CZ” Zhao requested the dismissal of a lawsuit filed by the United States Commodity Futures Trading Commission (CFTC).
In a July 27 court filing, attorneys for Binance and CZ accused the CFTC of exceeding its regulatory authority and engaging in regulatory overreach. The filing states that the CFTC is attempting to regulate foreign individuals and corporations operating outside the United States, which goes beyond the limits of its statutory jurisdiction and interferes with well-established principles of comity with foreign sovereigns.
As per the filing, the first six charges presented by the CFTC do not pertain to the foreign conduct addressed in the case, and certain charges do not meet the required legal standards. Additionally, the seventh charge, accusing Binance of evading the Commodity Exchange Act (CEA) should be dismissed as the agency itself fails to satisfy the necessary requirements for such an accusation, as asserted in the filing.
The motion to dismiss argues that the CFTC lacks regulatory authority over spot trading, both domestically and internationally. It questions whether Binance․com should be subject to specific registration and regulatory compliance provisions of the CEA and CFTC regulations based on its introduction of additional products after 2019 and its prior restriction of potential U.S. users.
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In March, the CFTC initiated a lawsuit against Binance, alleging that the company offered unregistered derivatives products in the U.S., including cryptocurrency trading services, futures, and options products. The regulator also accused Binance of inadequate supervision, lacking a reliable know-your-customer or anti-money laundering program, and failing to register as a futures commissions merchant, designated contract market, or swap execution facility.
In addition to the CFTC lawsuit, Binance is also confronting legal challenges in the U.S. stemming from a lawsuit filed by the Securities and Exchange Commission (SEC) in June.
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