This stated:

“Binance may make or amend this agreement and various rules from time to time as needed, and announce the same on the website, without any individual notice to you. The amended agreement and rules shall come into effect immediately and automatically upon being announced on the website. If you do not agree to the relevant amendment, you shall immediately stop using Binance Service. If you continue using Binance Service you shall be deemed as having accepted the amended agreement and rules.”

In 2019, Binance amended its Terms of Use (2019 Terms), inserting an arbitration clause providing for Singapore-seated arbitration under the rules of the Singapore International Arbitration Centre. The 2019 Terms also contained a class action waiver and a choice of law provision applying Singapore law.

(Note that Binance has since amended its terms to include an arbitration clause providing for arbitration in Hong Kong under the rules of the Hong Kong International Arbitration Centre.)

In May 2024, a class action was brought against Binance in the United States for various alleged violations of federal and state securities laws in respect of tokens purchased on the Binance exchange.

In July 2024, the defendants – Binance and its founder, Zhao Changpeng – filed a motion relying on the 2019 Terms to compel arbitration.

However, the Users argued that they were not bound by the 2019 Terms as they were not given sufficient notice of the amended terms.

Decision

Judge Andrew L. Carter, Jr. in the U.S. District Court for the Southern District of New York denied the motion compelling arbitration for Users who had opened accounts when the 2017 Terms were in force.

As a preliminary issue, the court rejected Binance’s argument that Singapore law should govern the validity of the 2019 Terms by virtue of the choice of law provision contained in those terms. For the court, this would be “putting the cart before the horse” since the court had yet to determine the applicability of the 2019 Terms in the first place. The court went on to apply an “interest analysis” under which it determined that the substantive laws of California, Nevada and Texas governed.

The court then turned to the question of whether the Users were bound by the arbitration clause in the 2019 Terms. The court found that where user assent to the terms of a contract is “largely passive”, namely through a browsewrap agreement by which consent is inferred from continued use of the site or platform, the proper legal test is whether a reasonably prudent offeree would be on notice of the amended terms.

Reasonable notice requires users to have either “constructive” or “actual” notice.

On the facts, the court found that, while the Users were not on constructive notice by virtue of Binance’s terms, they were later put on actual notice due to the court proceedings themselves.

With respect to constructive notice, the court found as follows:

(a) By contrast to other cases in which users had received individual communications containing a disclosure that advised them of a change to the terms, here Binance had given the Users no individual notice of the implementation of the 2019 Terms.

(b) By contrast to cases in which the user was on notice of the need to check online documents when they became available, here the Users had no reason to check the terms.

(c) There was no specific indication on the face of the 2019 Terms as to where the Users should look for the amendments to the 2017 Terms.

It did not change the court’s decision that Binance had included a change-of-terms provision in the 2017 Terms. This sought to bind Users to changes to the 2017 Terms “announced” on the website, but there was no evidence that an arbitration provision was “announced” as set out in the 2017 Terms.

Further, for the court, “parties to a contract have no obligation to check the terms on a periodic basis to learn whether they have been changed by the other side”. Indeed, this would lead to “absurd results” since “contract drafters who included a change-of-terms provision would be permitted to bind individuals daily, or even hourly, to subsequent changes in the terms”.

Therefore, with respect to constructive notice, notwithstanding the change-of-terms provision, Binance could not hold Users that had entered into transactions under the 2017 Terms to the amendments contained in the 2019 Terms.

With respect to actual notice, the Users had notice of the 2019 Terms in 2020 when they first filed complaints with the court.

Therefore, the court denied Binance’s motion to compel arbitration to the extent the Users advanced claims that accrued before the 2019 Terms were enacted.

The court did, however, ask for further submissions on the “open questions” of the applicability of the 2019 Terms to disputes which accrued after 2019 but before the plaintiffs had actual notice of the amendment, and second, the enforceability of the class action waiver in the 2019 Terms.

Conclusion

The larger cryptoasset platforms serve millions of users and are susceptible to technical, market, regulatory and third-party risk. It is therefore imperative to protect interests through terms of use, which are periodically updated to reflect best practice and regulatory conditions.

However, exchanges seeking to ensure enforceable updates should not rely exclusively on change-of-terms provisions.

Rather, they should implement other methods of notifying users of updates to terms of use. This might include proactively notifying users when terms are updated; drawing attention, whether in the notification or updated terms, to the specific clauses which have been amended; and perhaps even requiring continuing users to enter into a new clickwrap agreement upon new terms coming into force.

The authors have advised some of the leading exchanges on their terms of use and are happy to discuss such processes, as well as other means of maximising the enforceability of these protections.

Client Alert 2025-197