In a recent ruling, the Ontario Court of Appeal has made a decision declaring that Binance’s arbitration clause, which is found in its user agreement, is unenforceable in Canada. This ruling shows the need for transparency and fairness in the rapidly growing crypto industry. As the adoption of crypto grows, there is an increased need for protecting consumers and ensuring that crypto platforms remain compliant.
Cryptocurrencies are used for various purposes, including diversifying investment portfolios and making online payments across different platforms. Their increasing adoption in gaming and entertainment has led to the expansion of all crypto casinos. These gambling platforms allow players to place bets using cryptocurrencies like Bitcoin. However, according to crypto analyst Gary McLellan, there are several factors to consider before settling for a crypto casino, such as the accepted cryptocurrencies, available bonuses, and VIP programs, among others; let alone the listed security features. Staying cautious leads to choosing the best iGaming hub for your preferences in the end.
So, the Ontario Court of Appeal’s ruling came after some Canadian cryptocurrency investors filed a class-action lawsuit against Binance. The investors accused one of the world’s largest cryptocurrency exchanges of violating Ontario’s securities laws. The law states that Binance was supposed to offer cryptocurrency products after following proper regulatory procedures.
Binance allowed Canadian investors to trade cryptocurrency without filing a prospectus or registering with the Ontario Securities Commission between 2019 and 2022. Investors were concerned since crypto investments are labeled as high-risk and complex, which led them to file a class-action lawsuit against Binance under Ontario’s Securities Act in 2022. The investors argued that Binance’s failure to meet regulatory requirements deprived them of investor protections, which exposed them to potential financial harm.
The court made its ruling after finding several issues with Binance’s arbitration clause, which required disputes to be resolved through expensive arbitration in Hong Kong. The arbitration fees were estimated at around CAD 26,000 per case if taken to Hong Kong. These fees excluded travel, accommodation, and legal representation expenses. The court also defended its decision based on how the clause was hidden in many pages of non-negotiable terms of service that users had to go through and accept during the registration process. This did not give users any choice or enough time to read and understand the terms of service.
Additionally, Binance retained the sole right to make changes to the terms of the clause, including the arbitration process and its location, without the need to seek users’ consent. It made changes several times during the class-action period. The arbitration agreement was designed in such a way that the users are the ones who would always be at a disadvantage.
The courts emphasized that consumer protection laws in Canada demand fair and transparent dispute resolution processes. The decision made by the court now allows the lawsuit against Binance to proceed in Canadian courts. The Lochan v. Binance Holdings Limited, 2024 ONCA case serves as a reminder to investors of the importance of regulatory oversight in protecting their rights and investments.
