Judge Blocks Binance’s Bid to Force Arbitration in Class Action Over Token Sales
On February 28, 2026, U.S. District Judge Andrew L. Carter Jr. (Southern District of New York) denied Binance’s motion to compel arbitration in a long-running class action alleging the exchange sold unregistered securities to U.S. investors between 2017 and 2019.
The plaintiffs — residents of California, Nevada, and Texas — created Binance accounts before February 2019, when the platform added an arbitration clause and class action waiver to its Terms of Use. The court ruled that Binance failed to provide adequate notice of the change, and the clause cannot apply retroactively to claims that accrued earlier.
Key findings from the opinion:
- Posting updated terms on the website without individualized notice was insufficient under California law.
- The original 2017 terms included a change-of-terms provision, but users had no duty to periodically check for unilateral modifications (citing Ninth Circuit precedent).
Even if plaintiffs later received actual notice through litigation, retroactive application violates the implied covenant of good faith and fair dealing.
Class Action Waiver Also Deemed Unenforceable
The court further held that the class action waiver is invalid due to ambiguous language. While the heading in Binance’s terms refers to a “CLASS ACTION WAIVER,” the body of the section does not clearly detail its scope or effect. Under principles of contract interpretation, ambiguity in an adhesion contract is construed against the drafter (Binance).
The plaintiffs had already voluntarily dismissed all claims arising after February 20, 2019, narrowing the case to pre-2019 conduct.
Background of the Litigation
The class action originated in April 2020 amid a wave of lawsuits against major exchanges and token issuers. It was initially dismissed in 2022 but revived by the Second Circuit in 2024, which ruled that U.S. securities laws apply to Binance even without a physical U.S. headquarters. The Supreme Court declined certiorari in January 2025.
Binance’s 2023 guilty plea (unregistered money transmitter + sanctions violations) resulted in $4+ billion in penalties. Former CEO Changpeng Zhao served four months in prison before receiving a presidential pardon in October 2025.
A Binance spokesperson told The Block:
“In response to our motion on this issue plaintiffs voluntarily and correctly dismissed all claims that accrued on or after February 20, 2019. Binance will vigorously defend the limited claims that remain in this meritless case.”
Current Status and Next Steps
With arbitration off the table, the case can proceed as a class action in federal court — a significant procedural victory for plaintiffs. Discovery and class certification will now move forward.
The ruling arrives amid shifting U.S. regulatory dynamics: the SEC dismissed its own enforcement action against Binance in May 2025, but private litigation remains active.
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