Crypto.com has filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) after receiving a “Wells notice”
2 min readCrypto.com filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) this Tuesday (8th). The lawsuit is in response to a warning the company recently received from the SEC.
The type of letter sent by the agency, known as a Wells notice, indicates that it plans to take enforcement actions regarding Crypto.com’s token sales. This is part of a broader regulatory crackdown by the SEC on cryptocurrency companies.
Today, https://t.co/pFc4Pz9nFR filed suit against the SEC to protect the future of crypto in the U.S.: https://t.co/kXxyhF7zFe
— Kris | Crypto.com (@kris) October 8, 2024
The SEC alleges that most cryptocurrency transactions involve securities and should therefore be subject to federal law and the agency’s oversight. However, Crypto.com argues that the SEC is acting authoritatively, claiming that instead of relying on enforcement actions, the agency should establish clear rules through appropriate legal channels.
By taking this legal action, Crypto.com joins a growing number of cryptocurrency companies challenging the SEC’s regulatory approach.
The lawsuit focuses on the SEC’s classification of tokens as “Crypto Asset Securities” under federal law. According to Crypto.com, this classification puts these digital assets on the same level as traditional securities, which the company sees as an overreach of the SEC’s power.
Crypto.com challenges SEC’s jurisdiction over crypto assets
In its legal complaint, Crypto.com argues that the SEC is enforcing an “illegal de facto rule” that would classify most tokens as securities under both the Securities Act and the Exchange Act. The company claims this represents an illegal expansion of the SEC’s jurisdiction, as it creates new rules without following the formal regulatory processes required by the Administrative Procedure Act.
Crypto.com is seeking declaratory and injunctive relief to prevent the SEC from applying these rules. One of its key grievances is what it calls the SEC’s “inconsistent treatment” of different cryptocurrencies. For instance, Bitcoin and Ether are exempt from the SEC’s scrutiny, while other tokens with similar characteristics continue to be targeted without a clear justification.
Crypto.com also addresses regulatory uncertainty
In addition to the lawsuit, Crypto.com has taken further steps to address what it sees as regulatory uncertainty in the U.S. market. Its affiliate, Crypto.com Derivatives North America (CDNA), has filed a petition with both the Commodity Futures Trading Commission (CFTC) and the SEC. The goal of the petition is to clarify which cryptocurrency derivative products fall under the CFTC’s jurisdiction instead of the SEC’s.
This action is part of Crypto.com’s broader strategy to navigate the evolving regulatory landscape by using legal mechanisms such as those outlined in the Dodd-Frank Act. This would allow the company to identify areas where oversight remains unclear.
