Binance Must Face US Lawsuit Over Unregistered Token Sales as Judge Rejects Arbitration Push

A federal judge in Manhattan has dealt Binance a significant legal setback, allowing a class-action lawsuit alleging the sale of unregistered securities to proceed in court rather than private arbitration. The ruling by US District Judge Andrew L. Carter Jr. found Binance failed to properly notify users when it revised its Terms of Use in February 2019 to include an arbitration clause.

The case revives fundamental questions about whether certain tokens traded on Binance qualify as securities under US law. Plaintiffs from California, Nevada and Texas - who opened accounts between September 2017 and April 2018 - argue they were never adequately informed of the arbitration requirement added later.

This decision continues the legal pressure on crypto exchanges following the Second Circuit's 2024 reversal of an earlier dismissal. The appellate court had determined US securities laws could apply to Binance despite its lack of a formal domestic headquarters.