TLDR
- Court says Binance failed to give users notice of 2019 arbitration clause.
- Arbitration clause cannot apply to claims before February 2019.
- Judge finds Binance class action waiver language ambiguous.
- Case moves forward after Second Circuit revived it in 2024.
A federal judge in New York has blocked Binance from forcing a class action lawsuit into arbitration. The case alleges that the exchange sold unregistered digital tokens to U.S. investors.
The ruling prevents Binance from moving the dispute out of federal court. The decision allows the class action to proceed before the U.S. District Court for the Southern District of New York.
Court rejects Binance arbitration request
Judge Andrew L. Carter Jr. denied Binance’s motion to compel arbitration. The exchange had argued that its updated Terms of Use required users to resolve disputes through arbitration.
The court found that Binance did not provide adequate notice when it added an arbitration clause in February 2019. The plaintiffs opened their accounts between September 2017 and April 2018. At that time, the terms did not include arbitration or a class action waiver.
Binance argued that posting updated terms on its website was sufficient. However, the judge cited legal precedent stating that users are not required to check for unilateral contract changes. The original 2017 agreement allowed changes, but the court found that notice was lacking.
The opinion also stated that even if users became aware of the clause during litigation, it could not apply retroactively. Under California law, changes that are silent about prior claims are restricted by the covenant of good faith and fair dealing.
Class action waiver found unenforceable
The court also reviewed the class action waiver included in the 2019 terms. While a section heading referenced a “CLASS ACTION WAIVER,” the body text did not clearly define such a waiver.
Judge Carter described the language as ambiguous. Because Binance drafted the agreement, the court interpreted the unclear language against the company. The waiver was therefore found unenforceable.
The plaintiffs had already dismissed claims arising after February 2019. As a result, the dispute now focuses only on conduct that occurred before the updated terms took effect.
Background of the revived lawsuit
The case began in April 2020 during a series of class actions against crypto exchanges and token issuers. Plaintiffs alleged that Binance offered and sold unregistered securities to U.S. residents.
The district court initially dismissed the lawsuit in 2022. However, the U.S. Court of Appeals for the Second Circuit revived it in 2024. The appellate court ruled that U.S. securities laws could apply to Binance even without a domestic headquarters.
In January 2025, the U.S. Supreme Court declined to review that ruling. The case then returned to the district court for further proceedings.
Binance founder Changpeng Zhao pleaded guilty to federal charges in 2023. He was later pardoned by President Donald Trump in October 2025. Separately, the U.S. Securities and Exchange Commission moved to dismiss its enforcement action against Binance in May 2025.
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