Binance Loses Bid to Move Pre-2019 Investor Claims to Arbitration

Key Takeaways

• Federal court denies Binance’s motion to compel arbitration for pre-2019 users.
• Judge rules insufficient notice was given for 2019 terms of service changes.
• Digital platforms must provide direct notice for contractual updates, not just website postings.
• Binance’s class-action waiver deemed too ambiguous to enforce against users.
• Lawsuit proceeds in federal court, examining only the exchange’s pre-2019 operations.

A US federal judge has denied Binance’s motion to compel arbitration in an investor lawsuit, ensuring the case continues in open court. This significant ruling clarifies standards for how cryptocurrency platforms must communicate contractual modifications to users. All claims related to activity before 2019 will now proceed through traditional litigation.

Judge Finds Insufficient Notice of 2019 Terms Update

The court concluded that Binance failed to demonstrate that users who joined before 2019 received adequate notification of updated terms. The judge emphasized that simply posting revised agreements on a website does not constitute proper notice under established contract law principles. This finding prevented the exchange from enforcing its later arbitration requirements on early customers.

The court’s analysis highlighted that Binance’s original 2017 user agreement contained neither arbitration provisions nor class action limitations. The judge found that the company relied solely on a generic clause reserving the right to modify terms, without implementing a system to alert existing account holders of actual changes. The ruling determined that retroactive application of arbitration clauses to past conduct was improper.

Additionally, the court rejected arguments based on Binance’s self-description as a decentralized platform. The judge clarified that characterizing a business model as decentralized does not exempt it from fundamental contract law requirements. Digital service providers must still demonstrate mutual assent and adequate notice when modifying agreements, and pre-2019 claims will therefore remain under federal court jurisdiction.

Ambiguous Class Waiver Language Fails Enforcement Test

The judge examined the class-action waiver included in Binance’s 2019 terms and determined it lacked sufficient clarity for enforcement. The waiver language appeared only within a section header without substantive operative language in the body text. Under established legal principles requiring strict construction of rights waivers, the court ruled against the exchange.

The decision reinforces that federal courts will not uphold vague or incomplete provisions that restrict fundamental legal rights. Online service agreements must contain explicit, unambiguous language regarding class action waivers, with clear mechanisms demonstrating user acceptance. The deficient waiver cannot prevent collective legal action.

This portion of the ruling eliminated another procedural obstacle for the plaintiffs, expanding the scope of claims that can proceed. The decision ensures comprehensive examination of Binance’s early operational practices remains possible. The case will move forward through standard court procedures rather than private dispute resolution.

Case History and Next Steps

The litigation originated when investors from California, Nevada, and Texas filed suit alleging that Binance sold unregistered securities and operated as an unregistered broker-dealer. The plaintiffs claimed financial losses stemming from these alleged regulatory violations. The district court initially dismissed the complaint in 2022.

The Second Circuit Court of Appeals reversed that dismissal in 2024, breathing new life into the case and remanding it for further proceedings. The appellate decision permitted examination of the substantive allegations regarding Binance’s business practices during its early operational period. The matter has returned to the original trial judge for continued litigation.

Binance has noted that plaintiffs voluntarily dismissed claims related to later periods. The company indicated that the remaining allegations address only conduct occurring before 2019 and expressed its intention to vigorously defend against those claims. The court will now proceed with evaluating the merits under federal civil procedure.

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