Crypto.com has initiated legal action against the US Securities and Exchange Commission (SEC) following the receipt of a Wells notice. The notice indicates the regulator’s intention to bring an enforcement action against the company.
In a statement on Tuesday, 8 October 2024, the cryptocurrency trading platform described the SEC’s move as overreaching and unjust, adding that it has prompted the firm to pursue a lawsuit against the agency. Crypto.com said the SEC’s approach left the company “with no other choice.”
The firm criticized the SEC’s “unauthorized and unjust regulation by enforcement campaign.” It said that the agency’s hostility continues despite signs of bipartisan support for a more constructive stance toward cryptocurrency under future administrations.
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Crypto.com Claims SEC Exceeded Regulatory Authority
The lawsuit focuses on Crypto.com’s claim that the SEC has exceeded its regulatory authority, particularly regarding the classification of certain digital assets as securities.
The company is challenging the agency’s claim that many cryptocurrencies fall under its purview as securities, arguing that the SEC lacks the jurisdiction to regulate these assets without Congressional action.
The legal battle follows in the footsteps of other crypto firms that have taken similar action against the SEC.
ConsenSys, a blockchain software firm, filed a lawsuit earlier this year, challenging the SEC’s classification of ether as a security.
Coinbase, another major crypto exchange, has also engaged in multiple legal disputes with the SEC, pressing for clearer regulatory guidelines for the digital asset sector.
Today @cryptocom preemptively sued the SEC in Texas in response to an SEC Wells Notice.
The Wells Notice simply reiterates claims the SEC has made against other crypto markets like @Coinbase & @Binance.
Rather than rolling over, https://t.co/ZJNeMIG6JA is following the…
— MetaLawMan (@MetaLawMan) October 8, 2024
The SEC has maintained its stance that crypto exchanges must register with the agency, arguing that many digital assets meet the definition of securities.
In contrast, crypto firms argue that existing regulations are designed for traditional financial entities and are incompatible with the unique nature of the digital asset market.
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SEC Continues To Target Major Crypto Firms
The SEC has targeted some major players in the crypto industry over the past year, including Coinbase, Kraken, and Binance. The agency has argued that these platforms have listed unregistered securities and operated as unregistered exchanges, broker-dealers, and clearing agencies.
The tokens at the center of the dispute include SOL, ADA, BNB, FIL, FLOW, ICP, ATOM, ALGO, NEAR, and DASH.
Crypto.com argued that these tokens are traded on its platform in a manner similar to Bitcoin and Ether. While the SEC has declared that Bitcoin is not a security, the agency has not been as definitive regarding Ether’s status.
In addition to the lawsuit, Crypto.com has filed a petition with both the SEC and the U.S. Commodity Futures Trading Commission (CFTC).
The petition requests clarification on the regulatory status of certain cryptocurrency derivative products, asking for a joint interpretation to determine whether specific products fall under the CFTC’s jurisdiction.
The SEC has taken a tougher stance against crypto firms in 2024. More specifically, the regulator imposed nearly $4.7 billion in enforcement actions against crypto companies, a 3,018% increase from 2023.
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Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
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