Calling it a “misguided” federal agency, Crypto.com has sued the Securities and Exchange Commission (SEC).
The suit, filed Tuesday (Oct. 8), came after the cryptocurrency company received a Wells notice from the commission (SEC), typically seen as a sign of pending enforcement action.
“While this is an unprecedented move for our company to file suit against a federal agency, actions by that agency towards our industry have left us no other choice,” the company said in a news release.
“Specifically, 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 no matter how they are sold, whereas identical transactions in bitcoin (BTC) and ether (ETH) are somehow not.”
PYMNTS has contacted the SEC for comment but has not received a reply.
According to the suit, Crypto.com received the Wells notice in August, with SEC staff saying it would recommend that the regulator bring an enforcement action against the company, based on the argument that some network tokens sold on the platform are crypto asset securities.
“The SEC has refused to provide Crypto.com a complete list of network tokens sold on the platform that it plans to allege are crypto asset securities,” the suit said. “Instead, it has referred Crypto.com to other enforcement actions in which the SEC has asserted claims based on secondary-market sales of various network tokens.”
In its news release, Crypto.com said the Wells notice illustrates the SEC’s “unauthorized and unjust regulation by enforcement campaign,” arguing that is in spite of signs that the next administration — no matter which side prevails in November’s presidential election — will be more friendly to the crypto sector.
The term “regulation by enforcement” is a popular one among U.S. crypto firms as they continue to do legal battle with the SEC. It was used last month when Coinbase asked an appeals court to force the regulator to create new rules for digital assets.
“Regulation by enforcement does nothing but damage American consumers, innovation, US competitiveness, and our national security,” Coinbase legal chief Paul Grewal wrote in a thread on X. “Coinbase is determined to leave no stone unturned in our efforts to get clarity for our industry and the millions of Americans who hold crypto.”
When the SEC announced last year it was denying Coinbase’s petition for new rules in the digital assets sector, SEC Chair Gary Gensler said he backed the decision for three reasons.
“First, existing laws and regulations apply to the crypto securities markets,” Gensler said. “Second, the SEC addresses the crypto securities markets through rulemaking as well. Third, it is important to maintain Commission discretion in setting its own rulemaking priorities.”
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