Court distinguishes between tokens and contracts

Some good news for the industry came out of the courts Friday, in the case that the SEC brought a year ago against the world's largest crypto exchange, Binance.

• A federal judge allowed most parts of the case to proceed, but in doing so rejected the idea that a cryptocurrency token can be, in and of itself, an "investment contract" under the Supreme Court's Howey Test.

Why it matters: The judgment could allow for some tokens, at least, to live outside the SEC's purview, which would mean that normal people could hold them and use them in the course of daily business.

Between the lines: "In the Court's view, then, the SEC's suggestion that the token is 'the embodiment of the investment contract,' ... as opposed to the subject of the investment contract, muddied the issues before the Court," U.S. District Court Judge Amy Berman Jackson wrote.

• However, the opinion also says that "no one should read this case as deciding that crypto assets themselves are or are not 'securities;' that is not the question presented."
• It notes, additionally, that this question is one that other government branches "have been assiduously avoiding."

Context: Jackson was appointed by then-President Obama. She was confirmed by the Senate in 2011.

Zoom out: The court allowed most of the counts in the case to proceed, a blow to Binance, which had been working to get the whole thing tossed.

• Jackson dismissed counts related to the ongoing sale of Binance's token, BNB (it may still get in trouble for the initial sale, though — similar to the XRP case).

• She dismissed the charge over the ongoing sale of Binance's stablecoin, binance usd (BUSD).
• Charges over products built around lending, staking, registration as an exchange, the founder's role and the company's adherence to anti-fraud procedures will proceed.

Flashback: BUSD was wound down last year by Binance and its former partner, Paxos, following separate regulatory directives from the SEC and New York state financial regulators.

• At the time of its fall, it had a $12 billion market capitalization, making it one of the largest stablecoins.

💭 Our thought bubble: If there's a path forward for some portion of tokens to trade among the non-investor class, that ends the industry's existential threat.