As the SEC Binance case winds down, did the Binance lawsuit already do the damage?

How did the decision by SEC Binance to close the Binance lawsuit coincide with Binance losing over 30% of its global trading volume between 2023 and April 2025?

The SEC vs Binance battle fades as the SEC lawsuit against Binance gets quietly buried

After nearly two years of courtroom tension, regulatory scrutiny, and public debate, the U.S. Securities and Exchange Commission has formally withdrawn its civil lawsuit against Binance and its founder, Changpeng “CZ” Zhao. 

The decision, filed jointly by lawyers from both sides on May 29, in a Washington, D.C. federal court, marks a striking conclusion to one of the most high-profile legal battles in crypto’s recent history. 

The case was dismissed with prejudice, meaning it cannot be refiled, a rare outcome in regulatory disputes of this scale.

Binance, which processed an estimated $7.35 trillion in trading volume during 2024 despite operating under a legal cloud in the U.S., called the outcome a “landmark moment.” 

The SEC, in its official statement, said the dismissal was appropriate “in the exercise of its discretion and as a policy matter.” 

However, the filing also clarified that the move “does not reflect [the SEC’s] view on other crypto litigation,” leaving the door open for different approaches in other ongoing cases.

The dismissal comes just four months after President Donald Trump returned to the White House and appointed Paul Atkins, a known advocate of market-friendly regulation, as the new SEC Chairman. 

Under the previous administration led by Gary Gensler, the SEC had adopted a much stricter posture toward crypto firms, aggressively pursuing enforcement actions against major platforms including Binance and Coinbase. 

In February 2025, the SEC quietly requested a 60-day pause in the Binance proceedings, hinting at the possibility of a negotiated off-ramp, a signal that became clearer after the SEC also dropped its case against Coinbase that same month.

While the SEC has not elaborated on the reasons behind its reversals, critics have raised concerns over the optics of selective disengagement. 

Some argue that this shift risks creating the impression that regulatory pressure in crypto can be turned on or off depending on political alignment. 

A group of House Democrats recently cited a separate case involving Justin Sun, the founder of TRON (TRX), whose SEC fraud charges were reportedly dropped after he invested $75 million in a Trump-linked venture. 

These critics fear such outcomes may set a precedent where influence or timing, rather than legal merit, shapes enforcement.

Still, the precise terms behind Binance’s legal resolution remain unclear. No fines or admissions were added as part of the dismissal motion, and no quid pro quo has been disclosed.

The 2023 Binance lawsuit became the most aggressive move in the SEC against Binance agenda

The origins of the SEC’s case against Binance date back to June 2023, during a period when U.S. regulators had begun pursuing crypto enforcement more aggressively. 

The agency filed a wide-ranging civil complaint accusing Binance Holdings, its U.S. arm Binance.US (operated by BAM Trading), and CEO Changpeng Zhao of violating multiple securities laws. 

The complaint alleged that Binance misled investors, manipulated trading volumes, and failed to separate customer assets from company funds. 

According to SEC filings, the platform quietly enabled high-value U.S. users to access its unregulated international exchange, despite publicly claiming otherwise. 

The SEC also listed at least 13 tokens that it viewed as unregistered securities, including large-cap assets like Solana (SOL), Cardano (ADA), and Polygon (POL). Binance denied the allegations and criticized the SEC for refusing to provide clear rules for the industry. 

In the 24 hours following the filing, customers pulled roughly $790 million from Binance platforms, with most of the outflows coming from its U.S. division. 

Liquidity on Binance.US fell sharply as market makers exited, reducing market depth by over 75%. Bitcoin and other major assets also fell by 4-5% in value, reflecting the widespread fear across crypto markets.

Soon after the lawsuit was filed, the SEC requested a temporary restraining order to freeze Binance.US assets, citing fears that funds could be transferred overseas. The court didn’t issue a full freeze, but a negotiated agreement followed. 

Under the deal, Binance.US remained operational but agreed to restrict global Binance officials from accessing U.S. customer funds. This marked the beginning of a long legal process that would stretch into 2025.

Throughout late 2023 and early 2024, the case remained active, though momentum slowed. Binance’s legal team contested the SEC’s jurisdiction and challenged aspects of the discovery process. 

Meanwhile, separate investigations by the Department of Justice and other agencies took a more direct path. In November 2023, Binance entered into a plea agreement with the DOJ, admitting to violations of anti-money-laundering laws and U.S. sanctions. 

The company agreed to pay $4.3 billion in fines and overhaul its compliance systems. Changpeng Zhao also pleaded guilty to a criminal charge and resigned as CEO.

The plea deal resolved Binance’s liabilities with the DOJ, the Commodity Futures Trading Commission, and other regulators, but the SEC case remained open. 

Over time, that began to change. In February 2025, the SEC and Binance agreed to pause the litigation for 60 days. A second stay followed in April. 

Together, these signals hinted at a quiet shift in strategy under new SEC leadership, with growing speculation that the agency might not pursue the case further. The formal dismissal in May confirmed those expectations.

Investor reaction to the SEC’s dismissal was muted. Markets had been anticipating a resolution for months. Resultantly, Binance’s BNB token (BNB) rose marginally, up about 0.5%, indicating that the outcome was largely priced in.

The SEC Binance lawsuit is gone — the tension isn’t

Binance’s place in the U.S. crypto market has long been defined by workarounds and limits. 

After withdrawing its main exchange, Binance.com, from serving American users in 2019 due to regulatory concerns, the company launched Binance.US as a localized affiliate designed to operate within U.S. legal boundaries. 

Unlike its global counterpart, Binance.US never achieved dominant market status. Even before regulatory scrutiny intensified, the platform handled a small fraction of the volume seen on Coinbase, the country’s largest exchange, and lagged behind Kraken in user engagement and liquidity.

The SEC’s lawsuit in 2023 further weakened Binance.US’s already limited standing. Its market depth fell sharply, declining more than 70% as institutional players and market makers exited. 

Liquidity dried up, banking relationships became strained, and the exchange struggled to maintain core infrastructure such as fiat on-ramps and stable token listings. 

By late 2023, the platform had receded to the margins of the U.S. market, while Coinbase and Kraken strengthened their positions. Some users migrated toward Coinbase, drawn by its reputation for regulatory compliance and public reporting as a listed company. 

Reports at the time described a modest resurgence in Coinbase’s trading activity, fueled in part by investor preference for perceived regulatory clarity.

The dismissal of the SEC lawsuit in May 2025 changes the legal backdrop but not necessarily the market structure. 

Binance.US is no longer under the direct shadow of an SEC civil case, and this could help repair some of the reputational damage caused by earlier accusations. 

Confidence among users and potential partners may gradually recover, particularly given that the SEC closed the matter without financial penalties or a formal settlement. 

Institutional players who had cited litigation risk as a barrier may reevaluate their stance, seeing the dismissal as a signal that engagement with Binance no longer carries the same regulatory uncertainty.

Still, rebuilding takes time. Binance.US continues to face practical hurdles that go beyond legal status. 

The platform has not yet regained access to reliable dollar withdrawal systems, and there is no clear path to restoring previous liquidity levels without securing new banking partners or rebuilding trust with market makers. 

Meanwhile, Binance’s smaller size in the U.S. and limited product offerings remain a structural disadvantage compared to its domestic competitors.

At the same time, the dismissal also relieves pressure on Coinbase and Kraken, both of which have now seen their own legal clouds lift. 

The SEC’s case against Coinbase was also dropped earlier in 2025, clearing the way for both firms to compete without the distraction of courtroom proceedings. 

For Binance’s global operation, the implications are less clear. Reentering the U.S. in a more meaningful way would likely require alignment with emerging federal frameworks, which are still under development. Until those rules take shape, any expansion would carry new compliance risks.

The tone set by the SEC still echoes

Binance may have settled its regulatory dispute with the U.S. SEC, but globally, its legal challenges remain active and far-reaching. 

In Europe, regulatory friction has forced Binance into a fragmented and defensive posture. Belgium’s FSMA ordered Binance to cease services in June 2023 after concluding it had served Belgian residents from outside the EU. Binance later rerouted Belgian users through its Poland-registered entity. 

In the Netherlands, Binance failed to meet licensing requirements and was fined €3.3 million in 2022. By mid-2023, it exited the Dutch market entirely.

France, once seen as a strategic base for Binance, has turned more cautious. While Binance secured registration there in 2022, French authorities launched an investigation in 2023 over suspected money laundering and illegal client solicitation. 

In early 2025, the inquiry escalated into a formal probe covering alleged financial crimes between 2019 and 2024, including aggravated tax fraud.

In the UK, Binance has faced sustained resistance. The Financial Conduct Authority barred the firm from offering regulated services in 2021 due to anti-money laundering concerns. Binance continued to serve UK users from overseas but lacked a local license. 

In late 2023, new crypto marketing rules took effect, and Binance had to suspend new registrations until it aligned with updated communication requirements through an FCA-authorized approver.

In Asia, Binance’s regulatory path has followed a pattern of withdrawal and reentry. Japan’s financial authority issued repeated warnings about Binance’s unregistered operations, leading the exchange to exit in 2018. 

Binance returned in 2023 by acquiring a licensed local exchange and launching Binance Japan under regulatory approval. 

In Singapore, Binance wound down operations in early 2022 after being placed on an investor alert list. It later invested in a licensed local platform as a possible route back, though it has not resumed full operations.

Elsewhere in Asia, Binance faced criminal charges in Thailand in 2021 for operating without a license. The exchange later partnered with a local conglomerate to launch a regulated platform in 2023. 

In India, while Binance hasn’t faced direct enforcement, high crypto taxes and banking restrictions have severely limited its operations. peer-to-peer trading volumes declined after a 30% tax on crypto gains and 1% TDS were introduced in 2022.

Australia has also proved challenging. In 2023, the financial regulator cancelled Binance’s derivatives license after finding that most users had been misclassified as wholesale clients. 

Binance responded by halting derivatives trading, but spot services continued. Several Australian banks, including Westpac, later blocked transfers to Binance, citing fraud risks. The incident led to a noticeable decline in trading activity.

Africa has become another flashpoint. In Nigeria, authorities launched a lawsuit in February 2025 seeking $81.5 billion in damages and back taxes. The case accuses Binance of contributing to currency instability and capital flight. 

In 2024, local representatives were detained, and Binance was forced to suspend naira deposits and withdrawals. The exchange now operates with limited presence, primarily through peer-to-peer channels.

In the Middle East, Binance has secured licenses in Dubai and Bahrain, positioning itself favorably in those markets. However, it remains under review in other jurisdictions such as Turkey and Israel. 

In 2021, Turkish regulators fined the exchange ₺8 million for anti-money laundering violations, and further assessments have been reported.

The result of these regulatory challenges is visible in Binance’s market metrics. From a peak of over 55% in global trading volume in early 2023, the exchange’s share fell to around 38% by April 2025, a decline of over 30%.

Even with these developments, Binance remains the largest crypto exchange in the world, reportedly serving more than 245 million users globally. 

The SEC’s case dismissal in the U.S. may help improve Binance’s standing in some markets, but the company’s path forward continues to depend on its ability to meet regulatory expectations across an increasingly fragmented legal environment.