A Manhattan federal judge has denied Binance’s motion to compel arbitration for U.S. investors, ruling that claims predating February 20, 2019, cannot be subject to a later arbitration clause. The decision underscores that crypto exchanges must provide clear, individualized notice when amending terms of service, particularly when introducing arbitration and class-action waivers.
A Manhattan federal judge has denied Binance’s request to compel arbitration for U.S. investors whose token-loss claims predate February 20, 2019. The judge clarified that the exchange’s 2019 arbitration clause cannot be applied retroactively as users were not given clear, individual notice of the change.
Five investors from California, Nevada, and Texas filed a class-action alleging Binance and CEO Changpeng Zhao sold unregistered securities and operated as unregistered broker-dealers. The ruling found that a change of terms clause cannot allow one party to unilaterally impose arbitration without conspicuous, personalized notification.
The judge further deemed the class-action waiver in the 2019 terms unenforceable because it was vague, applying the rule of interpretation against the drafter. Consequently, claims from before 2019 remain under federal court jurisdiction, while post-2019 claims have been voluntarily dismissed by the plaintiffs.
This decision highlights the legal necessity for crypto platforms to provide understandable and prominently recognized updates to their terms of service. For exchanges, it signals that courts will scrutinize arbitration clauses closely and may reject them if users were not properly informed of the changes.
