Crypto.com, a leading cryptocurrency exchange, has initiated a lawsuit against the U.S. Securities and Exchange Commission (SEC) following the receipt of a Wells notice from the regulator. This preemptive legal action mirrors a similar move by Consensys earlier this year.
Fox Business journalist Eleanor Terrett shared the news on X, and the lawsuit, detailed on Crypto.com’s website, asserts that the SEC has overstepped its statutory authority and imposed an unwarranted classification of most crypto assets as securities.
The Wells notice, typically a precursor to enforcement action, prompted Crypto.com to challenge the SEC’s stance. The exchange contends that the regulatory body has “unilaterally expanded its jurisdiction beyond statutory limits” and established an “unlawful rule that trades in nearly all crypto assets are securities transactions no matter how they are sold.”
Crypto.com’s Lawsuit
Crypto.com argues that the SEC has overstepped its jurisdiction by classifying nearly all crypto asset transactions as securities transactions, regardless of their manner of sale. This stance contrasts sharply with the SEC’s treatment of Bitcoin (BTC) and Ether (ETH), which are not considered securities.
According to Crypto.com, this inconsistent application of rules is arbitrary and capricious, a phrase a judge previously used to describe the SEC’s actions. Crypto.com also noted that this action violates the Administrative Procedure Act, which mandates a notice and comment period for new regulations.
Crypto.com emphasized that the SEC’s actions undermine the crypto industry’s growth and innovation. The company described its lawsuit as a necessary step to protect the future of crypto in the U.S.
Crypto.com’s legal challenge reflects broader industry concerns about the SEC’s regulatory approach, which many view as enforcement-driven rather than constructive.
In a recent hearing Tom Emmer, Majority Whip of the U.S. House, tore apart SEC Chair Gary Gensler and his misguided actions over the past few years. Crypto.com’s decision to take legal action mirrors similar moves by other industry participants who argue that the SEC’s current tactics are detrimental to the U.S. crypto sector.
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More Legal Trouble for the SEC
In addition to the lawsuit against the SEC, Crypto.com’s subsidiary, Crypto.com | Derivatives North America (CDNA), has filed a petition with the Commodity Futures Trading Commission (CFTC) and the SEC.
The petition seeks to clarify the regulatory status of certain cryptocurrency derivative products, requesting a joint interpretation to determine whether these products fall under CFTC or SEC regulation. This initiative aims to bring regulatory certainty to the industry. It’s also in line with Crypto.com’s commitment to compliance and security.
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