NY Judge Bars Binance Bid to Push US Crypto to Arbitration

Binance lost its bid to push US crypto investor claims into private arbitration after a New York federal judge ruled on Thursday that the exchange cannot compel pre-2019 customers to resolve disputes outside open court. District Judge Andrew Carter Jr. in the Southern District of New York held that the platform's 2019 arbitration clause failed to bind users who bought tokens before February 20, 2019, preserving a major proposed class action against the world's largest crypto exchange.

Why Did the Judge Block Binance's Arbitration Clause?

Judge Carter concluded that Binance's arbitration provision was unenforceable for pre-2019 claims because users never received adequate notice of the revised terms. The exchange's original 2017 terms of use contained no arbitration or class action waiver provisions, according to the ruling. When Binance unilaterally updated those terms in 2019, it relied solely on a general change-of-terms clause and posting new language on its website.

The court found no evidence that Binance sent any individual notification or formally announced the new arbitration requirement to existing users. Carter rejected the argument that Binance's rhetoric about operating in a decentralized manner altered the standard contract law analysis for internet-based agreements. He ruled that the 2019 clause could not apply retroactively to conduct predating its February 20 effective date, since the contract never stated it would cover earlier activity.

Class Action Waiver Deemed Unenforceable

Carter also held that a purported US class action waiver embedded in a section heading of Binance's 2019 terms was unenforceable in federal court. The judge found that the contract never actually laid out the substance of any such waiver. Under established principles of contract interpretation, ambiguous provisions must be construed narrowly against the drafter, a standard that worked against Binance.

Williams v. Binance Background

The lawsuit, Williams v. Binance, is a proposed class action brought by five US investors from California, Nevada, and Texas. The plaintiffs allege that Binance and founder Changpeng Zhao (CZ) illegally sold unregistered securities on Binance.com and failed to register as a broker-dealer with US regulators.

The case was initially dismissed in 2022 before the Second Circuit Court of Appeals revived the investors' claims in 2024, sending the dispute back to Judge Carter's courtroom in the Southern District of New York.

Binance Responds to the Ruling

A Binance spokesperson said in a statement that the plaintiffs had voluntarily and correctly dismissed all claims that accrued on or after February 20, 2019, in response to the exchange's motion on arbitration. The spokesperson added that Binance would vigorously defend the limited claims that remain in what the company called a meritless case.

With the arbitration bid denied, the surviving pre-2019 claims will proceed in federal court rather than private arbitration in Singapore. The outcome carries broader implications for the crypto industry, as judges rather than arbitrators will assess whether digital-asset platforms can rely on unilaterally updated online terms to restrict investor lawsuits in the United States.