A United States federal judge ruled that customers of the global crypto exchange Binance cannot be forced into arbitration for losses on tokens bought before February 20, 2019. The decision keeps a major proposed class action lawsuit, which alleges the illegal sale of unregistered securities, in open court. Judge Andrew Carter Jr. found users lacked sufficient notice of the exchange’s 2019 arbitration clause.
A federal judge ruled that Binance cannot force a group of U.S. customers to arbitrate claims over losses on crypto tokens purchased on its global platform before February 20, 2019. This keeps a major class action, Williams v. Binance, in open court.
The decision by District Judge Andrew Carter Jr. held that claims were not bound by the 2019 arbitration clause. He found users lacked sufficient notice when the company unilaterally shifted its terms of use away from the 2017 version.
The judge stated Binance relied on a general change-of-terms clause and posting updated terms on its website. He found no evidence the exchange provided individual notice or formally announced the new arbitration provision to users.
Carter concluded the 2019 arbitration clause could not be applied retroactively to pre-February 20 conduct. The contract never clearly stated it would cover earlier activity, according to his ruling.
He also held that a purported U.S. class action waiver in the 2019 terms was unenforceable in federal court. The contract never actually set out the waiver’s terms and had to be interpreted narrowly against Binance as the drafter.
The case is a proposed class action brought by five U.S. investors who claim Binance and founder Changpeng Zhao (CZ) illegally sold unregistered securities. They allege the exchange failed to register as a broker-dealer.
In a statement, a Binance spokesperson said plaintiffs voluntarily dismissed claims that accrued on or after February 20, 2019. They added that Binance would “vigorously defend the limited claims that remain in this meritless case.”
The remaining claims will now proceed in a federal U.S. court rather than private arbitration in Singapore. Judges will assess whether crypto platforms can rely on unilaterally updated online terms to limit investor lawsuits.
