A federal judge in New York has ruled that Binance cannot compel certain customers to resolve their claims through arbitration in a lawsuit over alleged crypto token losses. The decision allows investors to pursue their case in court for claims that arose before February 20, 2019, marking a significant development in ongoing legal scrutiny of major cryptocurrency exchanges.
US District Judge Andrew Carter determined that Binance did not provide sufficient notice to customers when it modified its terms of use to include an arbitration clause and a waiver of class action rights. According to the ruling, there was no clear evidence that Binance properly announced the arbitration requirement or directed users to where such a provision could be found within its updated terms.
The court also found that the alleged class action waiver included in Binance’s 2019 terms of use was ambiguous and therefore unenforceable. As a result, customers who claim they were harmed by certain token listings before the specified date may continue their case in federal court rather than being redirected to private arbitration proceedings.
The lawsuit centers on allegations that Binance illegally sold unregistered crypto tokens that later lost significant value. Plaintiffs argue that the exchange failed to adequately warn investors about the substantial risks associated with purchasing those digital assets, as required under federal and state securities laws. The claims focus on losses tied to seven tokens including ELF, EOS, FUN, ICX, OMG, QSP and TRX.
In 2022, the lawsuit was initially dismissed by the same district court. However, a federal appeals court revived the case in 2024, allowing it to move forward. The latest ruling narrows the scope of the dispute, as customers previously agreed to drop claims related to transactions occurring after February 20, 2019. The remaining claims now proceed in open court rather than through arbitration.
Binance has stated that it will vigorously defend itself against the remaining allegations. The exchange has maintained that the claims lack merit. Changpeng Zhao, the founder and former chief executive of Binance, is also named as a defendant in the case.
Arbitration clauses are commonly used by financial and technology firms because they can limit public litigation, reduce legal costs and restrict access to certain procedural tools available in court. The judge’s decision underscores the importance of clear and transparent communication when companies update user agreements, particularly in fast evolving sectors such as cryptocurrency.
The ruling adds to broader regulatory and legal pressure facing digital asset platforms in the United States. As courts continue to examine token classifications, exchange practices and investor protections, cases like this could shape how crypto exchanges structure their user agreements and compliance frameworks going forward.
