Binance slams CFTC for overreach, says CZ not US person
Binance has submitted a motion to dismiss the lawsuit brought against it by the Commodity Futures Trading Commission, arguing that the CFTC is overstepping its jurisdictional boundaries by attempting to regulate foreign entities operating outside the United States.
Binance criticizes the CFTC’s effort to expand its authority beyond the confines of the U.S. Commodity Exchange Act. The cryptocurrency exchange further highlighted that the CFTC has introduced broadened arguments and redefined the term “U.S. person”, suggesting the regulator is seeking global control over any activity related to derivatives products in the crypto domain.
“Congress did not make the CFTC the world’s derivatives police, and the Court should reject the agency’s effort to expand its territorial reach beyond what is permitted by the law,” the filing reads
The filing asserts that the CFTC is attempting to regulate foreign individuals and corporations operating outside the United States, which exceeds the boundaries of its statutory jurisdiction and interferes with established principles of comity with foreign sovereigns.
According to the motion, Binance and CZ argue that spot trading, which involves the direct exchange of one cryptocurrency for another without leveraging futures contracts, does not fall under the purview of the CFTC’s regulatory authority.
Moreover, the motion questions whether Binance.com should be held accountable to specific registration and compliance provisions in the CEA and CFTC regulations, given its initial restriction on serving U.S. users in 2019.
In response to the CFTC complaint, the defendants sought permission to exceed the standard 15-page limit on supporting briefs, citing the complexity of the case and the number of arguments they anticipate making.
“The Court should reject the CFTC’s effort to use its attack on the non-U.S. Defendants in this case as a Trojan horse in order to achieve worldwide regulatory reach—which would have consequences far beyond this case and not intended by Congress,” Binance warned. The exchange called for the lawsuit’s dismissal citing multiple reasons, including “impermissibly extraterritorial” the exchanges added.
Among other things, the CFTC accuses Binance of secretly coaching its US deep-pocket users on how to evade compliance controls in order to maximize corporate profits.
CFTC chairman Rostin Behnam said earlier that Binance and its operatives knew for years that they were violating US securities laws, working actively to keep the money flowing and avoid compliance. He added that defendant’s emails and chats reflect that their compliance practices have been a sham.
Earlier in April, a CFTC commissioner said the regulator hopes to find a “path forward” in its ongoing legal dispute involving Binance and its CEO, but a decision has not yet been made on whether to settle the charges or take the case to court.
The watchdog was reportedly engaged in discussions with Binance on the complaint it filed against the exchange and its executives, alleging that they solicited American investors to participate in crypto trading in violation of the law.