HomeBlockchainCircle challenges SEC classification of securities in Binance case

Circle challenges SEC classification of securities in Binance case

In a crucial legal battle in the cryptocurrency sphere, Circle, the issuer of the USDC stablecoin, has taken the field, challenging the Securities and Exchange Commission’s (SEC) assertion against Binance that stablecoins should be classified as securities. 

Circle’s intervention marks a critical moment in the ongoing dispute between regulators and crypto platforms, with profound implications for the future of stablecoin regulation.

Circle’s intervention in Binance’s SEC case: why stablecoins are not securities

In the ever-changing cryptocurrency landscape, the clash between regulators and cryptocurrency platforms is a topic of growing importance. 

One of the most significant legal battles currently taking place in the cryptocurrency world involves the Securities and Exchange Commission (SEC) and the global cryptocurrency exchange giant, Binance

At the heart of the issue is whether stablecoins, specifically Binance’s BUSD stablecoin and Circle’s USDC, should be considered securities. 

Circle, the issuer of USDC, recently intervened in this case, arguing strongly that stablecoins should not fall under the SEC’s jurisdiction because of their distinct nature.

To provide context, in June the SEC levied several legal violations against Binance, accusing it of facilitating cryptocurrency exchanges, including BUSD, without proper registration. 

The SEC argued that these cryptocurrencies, by their very nature, constituted unregistered securities. 

This case has gained immense importance in the cryptocurrency world as it pits the world’s largest cryptocurrency exchange, Binance, against the U.S. financial regulator. 

Binance, along with other industry players such as Coinbase, is challenging the idea that cryptocurrencies should be subject to existing U.S. financial laws.

Circle’s defense: Stablecoins are not securities

Circle, a major stablecoin issuer, has entered the fray by presenting a compelling argument against the SEC’s position. 

Central to the defense is the claim that stablecoins, particularly those linked to the U.S. dollar, such as BUSD and USDC, should not be classified as securities. 

This argument is based on the premise that buyers of stablecoins do not expect financial gains from their purchase.

“Payment stablecoins, per se, do not have the essential characteristics of an investment contract,”

reads the document submitted by Circle. This assertion calls into question the very foundation of the SEC’s case. 

Circle argues that decades of legal precedent support the notion that the mere sale of an asset, disconnected from any subsequent promise or obligation by the seller, does not meet the criteria of an investment contract. In essence, it suggests that the SEC’s claims are fundamentally flawed.

The SEC’s basis for labeling BUSD as a security: the response of Binance and Circle

The SEC’s perspective, on the other hand, is that BUSD was marketed by Binance as an investment contract because of the promises of returns through its associated rewards programs. 

In the eyes of the SEC, this transforms BUSD from a mere stablecoin into a security. This view sets the stage for a legal showdown with profound consequences for the cryptocurrency industry.

In response to the SEC’s allegations, Binance, its U.S. subsidiary and its CEO, Changpeng “CZ” Zhao, have asked for the case to be dismissed. 

They claim that the SEC is trying to assert authority over digital assets without proper congressional authorization. This makes the legal battle even more complex, as it challenges the very boundaries of regulatory power in the cryptocurrency sphere.

It is noteworthy that Circle’s intervention takes the form of an amicus curiae, commonly referred to as a “friend of the court” brief. In this capacity, Circle offers its expert opinion to the court without being directly involved in the case. This underscores the industry’s broader interest in the outcome of this legal dispute.

Heath Tarbert, Circle’s Chief Legal Officer, plays a crucial role in this intervention. His previous role as chairman of the Commodity Futures Trading Commission (CFTC), another federal regulator suing Binance, adds gravitas to Circle’s arguments. 

His experience with cryptocurrency and federal regulation strengthens Circle’s case and underscores the industry’s concern about potential overreach by regulators.


The ongoing legal battle between the SEC and Binance, with Circle intervening, raises fundamental questions about the classification of stablecoins as securities. 

The outcome of this case will undoubtedly have far-reaching implications for the cryptocurrency industry, affecting how regulators interpret and apply existing financial laws to this rapidly evolving space. 

Circle’s argument challenges the SEC’s assertion that stablecoins like BUSD should be considered securities, providing a nuanced perspective that could shape the future of stablecoin regulation. 

While the cryptocurrency world watches closely, one thing is certain: the outcome of this case will have a lasting impact on the cryptocurrency ecosystem and the legal framework that regulates it.