US Judge Allows Binance Token Lawsuit to Move Forward in Court
A federal judge in Manhattan has rejected Binance’s attempt to push a long-running investor lawsuit into private arbitration, clearing the way for the case to proceed in open court.
The class action alleges that Binance sold unregistered digital tokens to US investors in violation of securities laws.
Key Takeaways
A US judge refused Binance’s request to force the case into arbitration.
The court found users were not properly notified about a 2019 arbitration clause.
The ruling moves the case closer to addressing whether some Binance-listed tokens qualify as securities under US law.
Court Says Users Weren’t Properly Notified
In a decision issued Thursday, US District Judge Andrew L. Carter Jr. ruled that Binance failed to adequately inform users when it updated its Terms of Use in February 2019 to include an arbitration clause and a restriction on class actions.
The plaintiffs — customers from California, Nevada and Texas — opened their accounts between September 2017 and April 2018, before those provisions existed.
Binance argued that its revised 2019 terms governed the relationship with users and required disputes to be handled through arbitration instead of in court. Judge Carter disagreed.
He said simply posting updated terms online was not enough notice. Customers, the court noted, are not required to regularly check whether a company has changed contract language on its own.
Even if some users later became aware of the arbitration clause during the lawsuit, the judge ruled it could not be applied retroactively to cover earlier claims.
Under California contract law, unilateral changes that don’t clearly address past conduct cannot be used to limit disputes tied to that earlier activity.
The judge also found problems with Binance’s class-action waiver. While the agreement’s heading referenced such a waiver, the body of the contract did not clearly define its scope. Because Binance drafted the standardized agreement, the court interpreted the ambiguity against the company.
Case Revived After Earlier Dismissal
The lawsuit is part of a broader wave of crypto-related cases filed in April 2020, when regulators and investors began closely scrutinizing token sales.
A lower court dismissed the complaint in 2022. However, the US Court of Appeals for the Second Circuit revived it in 2024, concluding that US securities laws could potentially apply to Binance — even though the exchange does not have a formal headquarters in the United States.
The Supreme Court declined to review that ruling in early 2025.
Since then, plaintiffs have narrowed their claims, dropping allegations tied to activity after February 2019. The remaining case focuses on earlier token sales.
With the arbitration issue resolved, the lawsuit can now move closer to the central legal question: whether certain tokens listed on Binance qualify as securities under US law.
Political Pressure Builds in Washington
The court decision comes as Binance faces renewed political scrutiny.
A group of 11 US senators recently called on federal authorities to examine whether the exchange complies with sanctions and anti-money-laundering rules. Lawmakers cited reports alleging that roughly $1.7 billion in digital assets flowed through the platform to Iranian-linked entities, raising concerns about possible sanctions evasion.
Separately, Senator Richard Blumenthal has launched a congressional inquiry seeking records related to Binance’s compliance controls.
Binance has denied the allegations, stating that it blocks Iranian users, reports suspicious activity and disputes claims that it facilitated Iran-related transfers. The company has also rejected reports suggesting it dismissed employees who raised compliance concerns.
Although the Securities and Exchange Commission dropped its own enforcement action against Binance last year, the private class-action lawsuit remains active — and now moves forward in federal court.
