Gunning for Crypto? Why the Crypto Industry Could Get Caught in the Crossfire of Mexico’s Gun Lawsuit at the Supreme Court

The Supreme Court recently heard oral argument in Smith & Wesson Brands, Inc. v. Estados Unidos Mexicanos, a landmark lawsuit brought by Mexico against American firearms manufacturers. Although ostensibly unrelated to digital assets, the Supreme Court’s forthcoming decision could significantly impact the crypto industry, particularly with respect to litigation premised on theories of aiding-and-abetting liability under common law and statutory tort frameworks. The Supreme Court’s decision could reshape liability in the crypto industry, potentially in ways few have anticipated.

Background

In essence, Mexico alleges that American gun manufacturers are liable for knowingly aiding illegal firearms sales by distributing weapons through dealers who disproportionately sell guns to straw purchasers, eventually reaching Mexican drug cartels. Mexico’s argument relies heavily on the Supreme Court’s 2023 decision in Twitter, Inc. v. Taamneh. [1] In that case, plaintiffs accused major social media companies of aiding and abetting ISIS by allowing terrorist content to proliferate on their platforms. [2] Although the Supreme Court ultimately held in Taamneh that such liability required more than general awareness of misuse—namely, “conscious, voluntary, and culpable participation” in the wrongful act—Mexico contends in its case that it meets this standard because the gun manufacturers consciously enabled illegal gun trafficking through their marketing and distribution practices, making them culpable participants in the wrongdoing. [3] The district court judge dismissed the case, holding the allegations were insufficient to establish aiding and abetting liability, but the First Circuit Court of Appeals reversed, applying the Supreme Court’s decision in Taamneh. [4]

Justice Kavanaugh’s Key Concern: A Slippery Slope of Liability

“What do you make of the argument, raised by the [gun manufacturers] and in several amicus briefs, that your theory of aiding and abetting liability would have sweeping consequences for the American economy? Many manufacturers and sellers of ordinary products know that some portion of their products will be misused—whether it’s pharmaceuticals, cars, or any number of consumer goods. How do we rule for you without creating a broad rule that exposes companies to liability merely because they know their products might be misused?” [5]

—Justice Kavanaugh to Mexico’s counsel during oral argument

Justice Kavanaugh’s question raises a key concern: If the Court sides with Mexico, could it unintentionally create broad liability risks for many other lawful industries? Manufacturers across various sectors—from pharmaceuticals to automobiles—regularly make products that might be misused by third parties. If liability expands simply because misuse of a product is foreseeable, the implications could be sweeping and unpredictable.

Gun manufacturers emphasized this risk in their arguments, insisting that holding them liable would open the floodgates to lawsuits across industries, making companies liable for the foreseeable misuse of otherwise lawful products. The Product Liability Advisory Council and American Tort Reform Association also submitted a brief that similarly cautioned the Court against premising liability on foreseeability, warning that it could lead to “unprincipled liability for costs of societal problems” for producers of inherently risky yet lawful products. [6] In the brief, they cite examples of current lawsuits involving lead paint, prescription drugs, and consumer products to illustrate the broader implications of weakening traditional proximate cause standards. [7]

These concerns seem to apply with equal—if not greater force—to the crypto sector, where the foreseeable misuse of crypto exchanges, digital wallets and other products could trigger massive liability based on foreseeable third-party misconduct. Crypto products (such as exchanges, mixers, token offerings, and wallet applications) have been repeatedly accused of facilitating a wide range of illicit activity, including cybercrime, child exploitation, human and drug trafficking, money laundering, sanctions evasion and terrorism. [8] And just as gun manufacturers assert they are not liable for crimes committed with legally sold firearms, crypto companies often defend themselves from liability for third-party misuse of their product by emphasizing that their underlying conduct was lawful. But, if the Supreme Court endorses Mexico’s theory, these companies could face a wave of litigation from plaintiffs harmed by the foreseeable, unlawful misuse of their products.

Binance & The October 7th Attacks: A Cautionary Tale

Two ongoing lawsuits against Binance vividly illustrate why the Supreme Court’s decision matters for crypto—highlighting real-world examples of expanded liability risks.

In Gess v. Binance, plaintiffs—victims and family members of victims harmed in Hamas’s violent October 2023 terrorist attack—allege that Binance knowingly facilitated significant financial transactions for Hamas by deliberately circumventing regulatory obligations. [9] Specifically, the plaintiffs claim that Binance failed to implement mandatory Anti-Money Laundering (AML) and Know Your Customer (KYC) protocols, enabling Hamas and other sanctioned terrorist entities to freely move funds through its cryptocurrency exchange. [10] They seek to hold Binance liable for aiding-and-abetting liability under the Anti-Terrorism Act (ATA), asserting that Binance materially supported terrorist organizations by knowingly allowing illicit transactions to occur, which directly contributed to financing the deadly attack​. [11]

Similarly, in Raanan v. Binance Holdings Limited, plaintiffs—American victims or family members of victims harmed in Hamas attacks—allege that Binance actively facilitated nearly $60 million in cryptocurrency transactions for terrorist organizations. [12] The plaintiffs highlight damning internal communications, including a compliance employee joking about marketing Binance to criminals. [13] They argue that Binance’s intentional disregard of regulatory obligations and active concealment of Hamas-related transactions constituted aiding and abetting terrorism under the ATA. [14]

In response, Binance filed a motion to dismiss, arguing that that “they, like the social media companies in Taamneh and mostly passive actors like banks, cannot become liable for all of their customers’ crimes simply by virtue of carrying out routine transactions.” [15] The district court, however, denied Binance’s motion, explicitly relying on the Taamneh decision. It concluded that plaintiffs adequately alleged Binance’s culpable participation by highlighting internal communications that showed Binance was consciously aware its platform was used by terrorists yet deliberately failed to enforce mandatory compliance protocols. [16]

Conclusion

The stakes are exceptionally high for both crypto companies and victims of crypto-related misconduct. A ruling favoring Mexico could greatly increase litigation risks and regulatory burdens for crypto businesses, because their products are inherently vulnerable to third-party misuse and illicit activity. Conversely, such a decision could provide significant opportunities for victims of crypto fraud and scams who often face challenges in identifying or pursuing elusive perpetrators. If the Court endorses Mexico’s theory, these victims might gain viable claims against crypto companies, entities that are both identifiable and financially capable of compensating victims.

Dynamis specializes in crypto litigation and asset recovery, representing both crypto businesses seeking proactive solutions to minimize liability exposure and victims pursuing recovery from misconduct involving digital assets. With deep experience representing both plaintiffs and businesses, we are uniquely positioned to help clients navigate the complex and evolving legal landscape. To discuss how the Supreme Court’s forthcoming decision may affect your interests, feel free to reach out to our team today.

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[1] 598 U.S. 471 (2023).

[2] Id. at 478.

[3] Id. at 493.

[4] See Estados Unidos Mexicanos v. Smith & Wesson Brands, Inc., 91 F.4th 511, 515 (1st Cir. 2024).

[5] Oral Argument, Smith & Wesson Brands, Inc. v. Estados Unidos Mexicanos, No. 23-1141 (Mar. 4, 2025), Tr. 67:16 – 68:13, https://www.supremecourt.gov/oral_arguments/argument_transcripts/2024/23-1141_8m59.pdf.

[6] See Br. for Product Liability Advisory Council & American Tort Reform Association as Amici Curiae Supporting Petitioners at 2–3, 12–13, Smith & Wesson Brands, Inc. v. Estados Unidos Mexicanos, No. 23-1141 (U.S. Dec. 3, 2024).

[7] Id. at 12-20.

[8] Tom Wilson & Angus Berwick, How Crypto Giant Binance Became a Hub for Hackers, Fraudsters and Drug Traffickers, Reuters (June 6, 2022), https://www.reuters.com/investigates/special-report/fintech-crypto-binance-dirtymoney; Press Release, U.S. Dep’t of Justice, Justice Dep’t Announces Largest-Ever Seizure of Terrorist Organizations’ Cryptocurrency Accounts (Aug. 13, 2020), https://www.justice.gov/opa/pr/global-disruption-three-terror-finance-cyber-enabled-campaigns; Press Release, U.S. Dep’t of Justice, Justice Department Investigation Leads to Shutdown of Largest Online Darknet Marketplace (Apr. 5, 2022), https://www.justice.gov/archives/opa/pr/justice-department-investigation-leads-shutdown-largest-online-darknet-marketplace#:~:text=The%20Justice%20Department%20announced%20today,2%20billion%20in%20cryptocurrency ; Press Release, U.S. Dep’t of Treasury, U.S. Treasury Sanctions Notorious Virtual Currency Mixer Tornado Cash (August 8, 2022), https://home.treasury.gov/news/press-releases/jy0916#:~:text=WASHINGTON%20%E2%80%93%20Today%2C%20the%20U,taken%20pursuant%20to%20Executive%20Order; Press Release, U.S. Dep’t of Justice, Founders Of Cryptocurrency Exchange BitMEX Plead Guilty (Feb. 24, 2022), https://www.justice.gov/usao-sdny/pr/founders-cryptocurrency-exchange-plead-guilty-bank-secrecy-act-violations; Press Release, U.S. Dep’t of Treasury, Treasury Takes Robust Actions to Counter Ransomware (Sept. 21, 2021), https://home.treasury.gov/news/press-releases/jy0364; Press Release, U.S. Dep’t of Justice, Manhattan U.S. Attorney Announces Charges Against Leaders of ‘OneCoin’ (Mar. 8, 2019), https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-announces-charges-against-leaders-onecoin-multibillion-dollar; https://home.treasury.gov/news/press-releases/jy1006; Michael Schwirtz & Nicole Perlroth, DarkSide, Blamed for Gas Pipeline Attack, Says It Is Shutting Down, N.Y. Times (May 14, 2021), https://www.nytimes.com/2021/05/14/business/darkside-pipeline-hack.html.

[9] See Compl. at ¶¶ 1–3, 12, 40-52, Gess, et al. v. Binance Holdings Ltd., No. 2:24-cv-00134 (M.D. Ala. Feb. 26, 2024).

[10] See id. at ¶¶ 11–12, 47–48, 51–52.

[11] See id. at ¶¶ 1, 12, 44–52, 53–63.

[12] Raanan v. Binance Holdings Ltd., No. 24-CV-697 (JGK), 2025 WL 605594, at *20 (S.D.N.Y. Feb. 25, 2025)

[13] Id. at *2, *21.

[14] Id. at *2.

[15] Id. at *20.

[16] Id. at *21-*24.