The Securities and Exchange Commission is overstepping its jurisdiction by regulating the cryptocurrency industry, Crypto.com alleges
The cryptocurrency exchange Crypto.com has filed a lawsuit against the US Securities and Exchange Commission (SEC) for what it believes to be an overstepping of legal boundaries in regulating the crypto industry.
The decision by Crypto.com to sue the SEC came after it received a so-called Wells Notice from the regulator, according to a statement issued on the company’s website on Tuesday. The company claims to be seeking to protect the future of the industry.
A Wells Notice is a formal declaration that the regulator intends to recommend an enforcement action against it. According to Reuters, retail trading platform Robinhood’s crypto business, major US crypto exchange Coinbase, and NFT marketplace OpenSea are among the companies in the digital assets industry that have received such notices.
The SEC’s “unauthorized and unjust” actions towards the crypto industry have left no other choice than to file a suit, Singapore-based Crypto.com stated.
“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…”
“We seek to stop the SEC’s illegal actions in excess of their authority and in violation of federal law in their tracks,” the statement reads.
Separately, the company filed a petition with the Commodity Futures Trading Commission (CFTC) and the SEC, seeking a joint interpretation to confirm that certain cryptocurrency derivative products are solely regulated by the CFTC.
The crypto industry has faced a US regulatory crackdown since the 2022 collapse of FTX. The Bahamas-based exchange was exposed as a Ponzi scheme used to siphon investor funds into the pockets of executives and, via donations, to politicians.
Crypto companies have since accused the SEC of overreach and of violating its jurisdiction, while the agency has claimed that it has the authority to regulate crypto under existing laws.
The SEC’s cryptocurrency-related actions increased by more than 50% in 2023 over the previous year, according to the US law firm Troutman Pepper. The firms expects this trend to continue.
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