Binance Hit With Major Legal Blow as Judge Blocks Arbitration Bid

• Federal judge denies Binance bid to force arbitration
• Court rules updated terms lacked proper user notice
• Class action against Binance moves forward in federal court

Binance has suffered a significant procedural setback after a federal judge in Manhattan denied its request to compel arbitration in a class action lawsuit brought by U.S. investors. The decision means the case will proceed in federal court instead of being resolved through private arbitration.

According to a Thursday opinion issued by the U.S. District Court for the Southern District of New York, Judge Andrew L. Carter Jr. ruled that Binance failed to properly notify users when it amended its Terms of Use in February 2019. That amendment introduced an arbitration clause and a class action waiver. The plaintiffs, who reside in California, Nevada, and Texas, created their accounts between September 2017 and April 2018. At that time, no arbitration provision existed in the agreement.

Binance argued that the updated 2019 terms should control the dispute. However, the court determined that simply posting revised terms on a website did not provide adequate notice to users.

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Court Finds Notice of Updated Terms Insufficient

Although Binance’s 2017 agreement included a change-of-terms clause, the judge cited Ninth Circuit precedent stating that users have no obligation to monitor a website for unilateral contract changes. As a result, the court concluded that Binance did not effectively bind earlier users to the 2019 arbitration clause.

The court also rejected the argument that the arbitration provision could apply retroactively. Even if the plaintiffs became aware of the clause during litigation, the judge held it could not cover claims that arose before February 2019. Under California law, a unilateral contract modification that is silent on retroactivity cannot automatically extend to accrued claims.

Class Action Waiver Deemed Ambiguous

In addition, the court addressed the class action waiver included in the updated terms. While a section heading referenced a waiver, the body of the provision did not clearly define its scope. The judge described the language as ambiguous and interpreted the adhesion contract against Binance as the drafter.

The lawsuit dates back to April 2020, when investors filed multiple class actions against crypto exchanges and token issuers. Although the case was dismissed in 2022, the Second Circuit revived it in 2024. The appeals court held that U.S. securities laws could apply to Binance even without a physical U.S. headquarters. The Supreme Court declined to review that decision in January 2025.

Plaintiffs previously dismissed claims arising after February 20, 2019, narrowing the case to earlier conduct. A Binance spokesperson stated that the company will defend the remaining claims as the litigation moves forward in federal court.

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