Federal judge Amy Berman Jackson, overseeing the United States Securities and Exchange Commission (SEC) case against Binance, Binance.US, and former CEO Changpeng Zhao, has ordered a court review of whether digital assets are securities.

In a minute order dated Jan. 18 in U.S. District Court for the District of Columbia, Judge Jackson said she would hear arguments on how the SEC treated cryptocurrencies under current regulatory and legal frameworks. Lawyers representing Binance.US will be allowed to address “whether a digital asset remains a security in perpetuity” and the SEC’s allegations that staking may be considered a security.

“The Court intends to hear argument on [whether an investment contract must involve a contractual undertaking and] whether the SEC ‘misunderstands the meaning of “scheme” in Howey,’ from one defense attorney only,” said Judge Jackson. “Similarly, although both memoranda address the major questions doctrine, and both raise background questions about whether litigation is the appropriate way for the SEC to proceed to oversee the crypto industry at all, one attorney should be assigned to argue that issue for the defense.”

Jan. 18 minute order from Judge Amy Berman Jackson. Source: Courtlistener

The Howey test has been the SEC’s standard for determining what is a security, is by ruling whether an asset meets the definition of an investment contract. Judge Jackson raised the issue, assuming it would need to be addressed in Binance’s case over tokens, including BNB (BNB) and Binance USD (BUSD). It’s unclear when both sides will present arguments on the matter.

Related: ​​SEC asks court to consider Terraform Labs ruling in Binance case

In many of its legal actions against U.S. crypto firms, the SEC has claimed that tokens largely qualify as securities and are subject to regulatory oversight by the commission instead of the Commodity Futures Trading Commission. In July 2023, a judge overseeing the SEC’s case against Ripple ruled the XRP token was not a security regarding programmatic sales on digital asset exchanges.

Since the Ripple ruling, lawyers for Coinbase — also facing a lawsuit brought by the SEC, cited precedent from the case in an August 2023 motion to dismiss. In other cases, the SEC has pushed back, arguing in its lawsuit against Terraform Labs and Do Kwon that whether certain tokens were securities was a “legal question” for a court, “not a factual question for the jury.”

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