By George Ward
The crypto community was shocked after news broke out that the US Commodity Futures Trading Commission (CFTC) had filed a lawsuit against the world’s largest crypto exchange, Binance. Per reports, the CFTC alleges that the crypto exchange is offering derivative trading services to customers in the United States, violating existing guidelines.
Crypto Community Reacts To CFTC’s Move
The latest lawsuit filed by the US regulator against Binance took many in the crypto industry by surprise, with some observers claiming that a political agenda drove the move. Sources familiar with the CFTC’s move disclosed that the regulator decided to go after Binance through a lawsuit to demonstrate to the US Securities and Exchange Commission (SEC) that this is a commodity issue, not security.
In the lawsuit, CFTC accused Binance of focusing more on commercial gains than regulatory compliance. It added that the giant crypto firm evades applicable federal laws to boost the customer base for its United States subsidiary, Binance.US.
Accordingly, the regulator accuses Binance and its CEO, Changpeng Zhao (CZ), of violating seven guidelines in the commodities exchange act (CEA) and the controlled foreign company (CFC) regulations. The lawsuit reportedly targets the exchange’s US trading arms, Binance.US and Merit Peak.
According to the CFTC, Binance and its subsidiaries are a single enterprise under an ultimate beneficial owner (UBO) supervised by its CEO. The CFTC demands in the lawsuit that Binance and its owner should be banned from participating in any of the activities highlighted in the case.
These include trading on approved exchanges and holding or directing any commodity trading in digital assets. The CFTC wants the court to compel Binance to forfeit the trading proceeds, revenues, loans, commissions, salaries, and other fees derived from US citizens.
The CFTC-Binance Impact
Given the focus on the SEC for most of the time, the latest action from another US regulatory agency has raised eyebrows among market observers. There is a general belief that the CFTC, unlike the SEC, only goes after smaller players in the industry without success.
This was evidenced by the 2018 case against Bitfinex, where the crypto exchange opted to settle the case with CFTC with a heavy fine in 2021. According to a market observer, Adam Cochran, the notion that the CFTC does not go after the big crypto players have been laid to rest with this recent event.
He added that the CFTC differs from the SEC and that its actions usually prove fatal for the fledgling digital asset ecosystem. Furthermore, Cochran posted on his Twitter handle that the evidence gathered by the regulator against Binance could prove fatal for the exchange’s operation in the United States.
He opined that Binance might be unable to fight the case or could choose an out-of-court settlement.