Judge Slams Door on Binance’s Arbitration Escape — Class Action Over Unregistered Tokens Moves Forward

In a major legal blow to the world’s largest cryptocurrency exchange, a federal judge in Manhattan has rejected Binance’s attempt to force a high-stakes securities lawsuit into private arbitration — keeping alive a class action that could redefine how digital tokens are regulated in the United States.

The ruling, delivered Thursday by U.S. District Judge Andrew L. Carter Jr., is the latest in a series of courtroom setbacks for Binance as it faces mounting legal pressure on multiple fronts. At the heart of the dispute: whether the exchange sold unregistered securities to U.S. investors through its platform.

Binance’s Arbitration Gambit Fails

Judge Carter’s opinion centers on a critical procedural question — whether Binance’s 2019 revision to its Terms of Use, which included an arbitration clause and a class-action waiver, could apply to customers who opened accounts before those changes were made.

The answer? A resounding no.

The plaintiffs — a group of customers from California, Nevada, and Texas — had opened their Binance accounts between September 2017 and April 2018, well before the exchange updated its terms in February 2019. The judge ruled that Binance failed to provide adequate notice of the new terms, and therefore could not enforce them retroactively.

Simply posting revised terms online, the court found, is not enough to bind users to new contractual obligations — especially when those changes limit their ability to sue in court.

“A unilateral change to a contract cannot be used to bar claims that arose before the change was made,” Judge Carter wrote, citing California contract law. The court also noted that the arbitration clause’s class-action waiver was poorly defined and ambiguous, leading to a ruling against Binance on that front as well.

A Case Years in the Making

The lawsuit is part of a broader wave of litigation that began in April 2020, when dozens of crypto-related class actions were filed across the country. At the time, regulators and plaintiffs’ attorneys were zeroing in on token sales, questioning whether certain digital assets should be classified as securities under U.S. law.

Binance initially succeeded in getting the case dismissed in 2022, but the U.S. Court of Appeals for the Second Circuit revived it in 2024. That decision was groundbreaking: it affirmed that U.S. securities laws could apply to Binance even though the exchange operates without a formal U.S. headquarters.

The Supreme Court declined to hear Binance’s appeal earlier this year, leaving the Second Circuit’s ruling intact.

Now, with the arbitration roadblock cleared, the case is set to move into its next phase — where plaintiffs will argue that tokens sold on Binance’s platform constitute unregistered securities, potentially exposing the exchange to billions in liability.

Political Heat Intensifies

The courtroom drama is unfolding against a backdrop of escalating political scrutiny. A bipartisan group of 11 U.S. senators has called on federal authorities to investigate whether Binance is complying with sanctions and anti-money laundering (AML) laws.

Citing whistleblower allegations, lawmakers claim that roughly $1.7 billion in digital assets may have moved through the platform to Iranian-linked entities — a potential violation of U.S. sanctions. They also raised concerns about newer Binance payment products that could be used to evade detection.

Senator Richard Blumenthal has launched a congressional inquiry, demanding records on Binance’s internal compliance controls. The company has pushed back hard, denying the allegations and insisting it reports suspicious activity to authorities. Binance also says it blocks Iranian users and disputes media reports about sanctions violations.

In a separate development, the Securities and Exchange Commission (SEC) moved to drop its own enforcement action against Binance last year — but the private class action remains very much alive.

What’s at Stake?

If the plaintiffs succeed, the implications could be seismic for the crypto industry. A finding that certain tokens are unregistered securities could force exchanges to delist those assets, reshape how they conduct business in the U.S., and open the floodgates to similar lawsuits.

For Binance, already under pressure from regulators worldwide, the case is another flashpoint in a long battle for legitimacy. For investors, it’s a reminder that the legal status of crypto assets remains murky — and that courts, not just code, may ultimately decide their fate.

Tags: Binance, cryptocurrency, class action, securities lawsuit, arbitration, unregistered tokens, crypto regulation, SEC, U.S. District Court, Andrew L. Carter Jr., Second Circuit, sanctions, AML, Iran, crypto compliance, digital assets, token sales

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