SEC Drops Lawsuit Against Binance, Signaling Shift in Crypto Regulation

Published Thu, May 29, 2025 | Updated 5 Hours Ago
By MacKenzie Sigalos, CNBC

In a significant development for the cryptocurrency landscape, the U.S. Securities and Exchange Commission (SEC) has officially dropped its lawsuit against Binance and its founder Changpeng Zhao, marking a notable conclusion to one of the last major enforcement actions the agency had pursued in the crypto sector. This decision, announced in a Thursday filing with the U.S. District Court for the District of Columbia, came after a collaborative motion from both the SEC and Binance, aiming to dismiss the case originally filed in June 2023. ### Background of the Lawsuit

The SEC’s initial complaint against Binance alleged several violations, including the illegal provision of services to U.S. customers, misrepresentation of trading volumes, and the commingling of customer funds. Additionally, the agency claimed that Binance allowed trading in crypto assets considered unregistered securities—a position also taken against other prominent exchanges like Coinbase and Kraken under previous SEC leadership.

This dismissal not only reflects a shift in enforcement priorities but also highlights the ongoing evolution of regulation within the rapidly changing cryptocurrency landscape. The SEC’s action was the last significant regulatory push against Binance following a settlement reached last year, in which the exchange agreed to pay $4.3 billion to resolve various legal issues, including Zhao’s guilty plea and subsequent resignation as CEO. Notably, Zhao avoided jail time and retained a significant portion of his wealth.

Implications for the Crypto Industry

The end of the SEC’s lawsuit is seen as a symbolic conclusion to one of the most aggressive regulatory crackdowns on the crypto industry in U.S. history. The move also signals a change in the approach of the Trump administration, which has indicated a desire to align itself more closely with the interests of the cryptocurrency market. Recently, the Department of Justice disbanded its crypto enforcement team, and the Commodity Futures Trading Commission is poised to be led by a venture capitalist with strong ties to the crypto realm.

Binance, recognized as the world’s largest digital asset exchange by trading volume, continues to expand its presence. The company is set to receive a $2 billion investment from MGX, an Emirati state fund, fully denominated in USD1—a stablecoin recently introduced by the Trump family’s World Liberty Financial.

Alongside this investment, Binance is forging deeper connections in Pakistan, where World Liberty Financial has penetrated the market through a partnership with the government. Zhao’s appointment as an adviser to Pakistan’s newly formed Crypto Council underscores this growing influence.

Regulatory Transition at the SEC

The dismissal of the Binance lawsuit aligns with comments made by SEC Commissioner Hester Peirce, who emphasized a renewed focus on clearer regulatory guidelines. She noted that the agency aims to move away from excessive enforcement while working to create foundational rules that adequately address the unique characteristics of the cryptocurrency sector.

"It is not time for people to think, ‘I have a free pass to go rip people off in the name of crypto.’ That is not the case," Peirce affirmed, signaling that while enforcement may be loosening, protections against fraud remain a priority.

This regulatory transformation under the SEC’s new leadership includes steps to retract prior constraints, such as the repeal of the controversial Staff Accounting Bulletin 121, which had compelled banks to classify cryptocurrency holdings as liabilities. In addition, a guidance shift has indicated that most meme coins are not considered securities under federal law.

The SEC’s recent moves suggest an overall trend toward fostering a more inviting environment for cryptocurrency innovation and investment. The implications of this regulatory shift are likely to reverberate throughout the industry, shaping the future of digital asset trading and compliance in the United States.

As the crypto landscape continues to evolve, stakeholders will be keenly watching how these regulatory changes will influence market dynamics and consumer protection efforts in the coming months.