Binance lawsuit moves forward as judge rejects arbitration push
A US federal judge has ruled that a lawsuit against Binance can move forward in open court. The decision blocks the cryptocurrency exchange's attempt to force arbitration, allowing investors to pursue their claims publicly. The case centres on allegations that Binance sold unregistered securities and operated illegally as a broker-dealer.
The litigation began in 2022 when investors accused Binance of financial misconduct, including the sale of unregistered securities. They claimed the platform's operations led to significant losses. The case was initially dismissed in 2022 but was revived last year by the Second Circuit Court of Appeals, which permitted a closer look at Binance's early business practices.
The judge found that Binance's original 2017 user agreement lacked arbitration clauses or class-action restrictions. When the company later updated its terms, it failed to properly notify users who joined before 2019. Simply posting revised agreements online did not meet legal standards for notice, according to the ruling.
Binance argued that its decentralised structure excused it from traditional contract law requirements. The court rejected this claim, stating that the platform must still follow basic legal principles. The judge also ruled that Binance's class-action waiver was too vague, as it lacked clear language and a proper user acceptance process.
The decision means Binance's early operational practices will now face scrutiny through standard court procedures. The company had sought to push disputes into private arbitration, but the court determined that retroactive enforcement of new terms was unjustified.
The ruling allows investors to proceed with their lawsuit in a public forum rather than behind closed doors. It also sets a precedent for how digital platforms must communicate changes to user agreements. The case will now examine Binance's conduct in its early years, with potential implications for future regulatory oversight.
