SEC Drops Lawsuit Against Binance, Closing Chapter on Regulatory Battle

In a significant development for the cryptocurrency sector, the U.S. Securities and Exchange Commission (SEC) has voluntarily dismissed its civil lawsuit against Binance, the world’s largest crypto exchange, and its founder Changpeng Zhao, marking a pivotal moment in the evolving U.S. approach to digital asset regulation.

The dismissal with prejudice—meaning the lawsuit cannot be refiled—was filed via a joint stipulation signed by legal counsel for the SEC, Binance Holdings Ltd., and Zhao in the U.S. District Court for the District of Columbia on May 29, 2025.

Background of the Case

The SEC originally sued Binance and Zhao in June 2023, alleging violations including:

• Artificially inflating trading volumes

• Diverting customer funds

• Misleading investors about operational and surveillance controls

• Unlawful facilitation of trading in cryptocurrency tokens, the SEC considered unregistered securities

These claims were part of a broader regulatory push initiated under former SEC Chair Gary Gensler during the Biden administration, aimed at classifying many cryptocurrency tokens as securities, thereby subjecting them to stringent federal regulation.

The dismissal, however, follows a significant policy shift under the current administration. SEC Chair Paul Atkins, appointed after President Donald Trump’s return to office, has advocated for clear regulatory frameworks rather than enforcement-led approaches.

A Landmark for the Industry

In a public statement, a Binance spokesperson welcomed the dismissal, calling it:

“A landmark moment for the cryptocurrency industry. We’re deeply grateful to Chairman Atkins and the Trump administration for recognising that innovation can’t thrive under regulation by enforcement.”

The SEC, while offering no further comment, stated in the court filing that the dismissal was discretionary and “did not reflect a position” on ongoing or future cryptocurrency litigation.

Legal experts note that dismissing a case with prejudice, particularly after securing significant criminal penalties, indicates a deliberate strategic retreat. This aligns with the administration’s broader move to de-escalate regulatory hostilities with crypto firms.

Changpeng Zhao’s Legal History

This civil case was separate from the high-profile criminal proceedings concluded in November 2023, when Binance agreed to pay a $4.32 billion penalty to resolve charges of violating federal anti-money laundering and sanctions laws.

Zhao, known in the industry as “CZ,” pleaded guilty to anti-money laundering violations and served a four-month prison sentence, after which he was released in September 2024.

Crypto Enforcement Trends Under the Trump Administration

The Binance lawsuit dismissal is not isolated. In February 2025, the SEC also dismissed its enforcement action against Coinbase, the largest U.S.-based crypto exchange, which had been accused of offering at least 13 unregistered securities.

These decisions reflect a regulatory pivot, as President Trump, during his 2024 campaign, vowed to become the “crypto president” and halt what many in the industry called a regulatory crackdown.

SEC Chair Atkins, in a public forum on May 12, 2025, emphasised the need for "clear rules of the road" rather than relying on retroactive enforcement.

“The goal is to foster innovation, safeguard investors, and shut down bad actors—without criminalising emerging technologies.”

Industry Implications

The SEC’s withdrawal from active litigation against major exchanges has rekindled investor confidence. 

According to CoinMarketCap, trading volumes surged nearly 18% in May, and venture capital funding in blockchain startups rose to $13.6 billion, a 24% increase quarter-over-quarter.

Yet, not all cases have been dropped. On May 20, the SEC filed a new lawsuit against Unicoin, accusing the startup of fraudulently raising over $100 million by selling tokens falsely claimed to be asset-backed.

This suggests that while broad policy enforcement may be softening, cases involving alleged fraud and misrepresentation will remain a key focus.

Final Word

The SEC’s decision to drop its lawsuit against Binance marks a notable shift in U.S. regulatory policy toward cryptocurrencies. While the long-term impact remains to be seen, the move suggests a friendlier climate for digital innovation under the Trump administration, provided industry players uphold standards of transparency and compliance.