US District Judge Andrew Carter Jr. ruled that customers who lost money buying seven tokens on Binance - ELF, EOS, FUN, ICX, OMG, QSP, and TRX - can pursue their claims in open court rather than private arbitration, rejecting the exchange's key procedural defense in a lawsuit now in its sixth year.
The court found Binance never adequately notified users of an arbitration clause it added to its Terms of Use in February 2019, and that the class action waiver in those terms was too ambiguous to enforce. Binance called the remaining claims "meritless" and said it would vigorously defend them.
The plaintiffs allege Binance sold them unregistered securities without disclosing the "significant risks" required under federal and state securities laws, and are seeking to recoup what they paid.
All seven tokens in question experienced severe losses following their peak valuations during the 2017–2018 cycle. Founder and former CEO Changpeng Zhao is named as a co-defendant; his lawyers did not respond to a request for comment.
Why Arbitration Matters Here
Defendants in complex financial litigation often prefer arbitration to open-court proceedings for three reasons: hearings remain confidential, discovery is more limited, and costs are generally lower.
A ruling forcing this case into arbitration would have effectively shielded much of the proceeding from public scrutiny.
Carter found no evidence Binance announced the arbitration provision or directed users where to find it in their terms - a threshold the court considered necessary for the clause to bind existing customers.
The class action waiver failed separately because, while the 2019 terms included a heading referencing it, the body of the provision never detailed its terms, which the court read against Binance as the drafter.
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Case History
The lawsuit originated in a wave of class actions against major crypto exchanges filed in April 2020. Carter dismissed it in 2022, but a federal appeals court reinstated it in 2024, ruling that US securities laws apply to Binance regardless of its lack of a domestic headquarters.
The Supreme Court declined to review that decision in January 2025. The SEC separately dropped its own enforcement case against Binance last May.
Zhao pleaded guilty to federal crimes in 2023 and was pardoned by President Trump in October 2025.
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