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Crypto.com Sues SEC, Alleging Regulatory Overreach in Crypto Industry

By  |  October 8, 2024

Crypto.com, a leading cryptocurrency trading platform, has filed a lawsuit against the U.S. Securities and Exchange Commission (SEC), accusing the agency of exceeding its legal authority by attempting to regulate the cryptocurrency sector. The lawsuit, filed on Tuesday in a federal court in Tyler, Texas, marks the latest clash between the crypto industry and U.S. regulators as the debate over how digital assets should be classified intensifies.

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    The lawsuit comes in response to a Wells notice that Crypto.com received from the SEC. According to Reuters, the Wells notice—a formal communication indicating that the regulator’s staff intends to recommend enforcement action—was issued on the basis that certain tokens traded on Crypto.com’s platform qualify as securities. The SEC has long argued that many cryptocurrencies are subject to U.S. securities laws, which are designed to protect investors.

    Crypto.com, however, disputes this characterization. In a statement, the company said, “Our lawsuit contends that the SEC has unilaterally expanded its jurisdiction beyond statutory limits and separately that the SEC has established an unlawful rule that trades in nearly all crypto assets are securities transactions.” The company also accused the SEC of attempting to impose sweeping regulations without proper legal justification.

    Related: Southeast Asia Emerges as Crypto, Blockchain, and AI Hub

    This legal challenge is part of a broader conflict between the SEC and the cryptocurrency industry. Crypto companies have frequently accused the agency of regulatory overreach, claiming that its enforcement actions undermine innovation and fail to acknowledge the unique nature of digital assets. The SEC, under the leadership of Chair Gary Gensler, has maintained that it is acting within its mandate to protect investors, insisting that the industry must comply with existing securities laws.

    Other major players in the crypto space, including Robinhood’s crypto arm, Coinbase, and the NFT marketplace OpenSea, have also been targets of similar Wells notices, per Reuters. These firms, like Crypto.com, argue that the SEC’s approach to regulating digital assets is inconsistent and lacks clear guidance.

    In addition to the lawsuit, Crypto.com has filed a petition with both the SEC and the Commodity Futures Trading Commission (CFTC), seeking a joint interpretation to clarify the regulatory framework governing certain cryptocurrency derivatives. The company is pushing for the CFTC to have sole authority over these products, given its expertise in regulating derivatives markets.

    Source: Reuters