Right, my point is that the allegedly “protected” parties in this case would still be able to trade with Binance if Binance were licensed.
Correct. Except those parties would have their own risk disclosure obligations which the CFTC could check.
It’s easy to hide leverage in swaps. They also uniquely accumulate counterparty risk, since the standard way to close out a swap isn’t to cancel the original swap, but to enter into a new, counter-balancing one. This means even a minor party failing can lead to systemic risk as positions their counterparties assumed were hedged are now levered and open. Add in opaqueness, and any swap participant going under leads to legitimate concerns about everyone else. This happened in 2008. The rules Binance helped institutions evade are the ones that were written to prevent that form of crisis re-emerging.
The question I keep pointing at though is, why does it matter? These are not retail traders. They’re institutions that are considered experts in their field and hold no customer deposits (aside from accredited investors, who are again considered knowledgeable enough to not need government oversight to invest).
Everyone here ostensibly knows the risks and their crash won’t tank i.e. the housing market or pension funds.
The point of this CFTC lawsuit is to attack crypto, no more, no less. If you don't like crypto, you may think that's a good thing, but I'd argue that it's always a bad thing when regulators leverage technicalities to achieve political ends. And make no mistake, that is exactly what is happening here.