Today, October 8, Crypto.com reported that it has filed a lawsuit against the U.S. Securities and Exchange Commission to challenge the agency’s overreach in regulating the crypto industry. The company aims to protect the future of crypto in the United States by challenging the SEC’s authority and its enforcement methods. It has demanded a jury trial.
The legal action follows a notice from Wells that Crypto.com received from SEC staff, indicating possible enforcement action. The company argues that the SEC is engaging in improper regulation through enforcement and is acting outside its statutory mandate. This move brings Crypto.com into line with other industry peers who are actively defending themselves against what they see as bad intentions from the federal agency.
Crypto.com’s lawsuit alleges that the SEC unilaterally expanded its jurisdiction beyond legal limits. Specifically, the company disputes the SEC’s position that almost all transactions in crypto assets are securities transactions, except those involving Bitcoin (BTC) and Ether (ETH). Crypto.com argues that this position is inconsistent and has no legal basis, especially when other digital assets have nearly identical characteristics and are sold in the same way as BTC and ETH.
The company also points out that in adopting this rule, the SEC failed to comply with the mandatory notice and comment period required by the Administrative Procedure Act. By bypassing this process, Crypto.com claims that the SEC’s actions are arbitrary and capricious.
In addition to the lawsuit, Crypto.com’s subsidiary, Crypto.com | Derivatives North America (CDNA) has filed a petition with both the Commodity Futures Trading Commission (CFTC) and the SEC. The petition seeks a common interpretation to confirm that certain crypto derivatives are regulated solely by the CFTC. Under the Dodd-Frank Act, the agencies have 120 days to issue a jointly approved interpretation or reject it with a written statement.
Crypto.com emphasizes its commitment to compliance and regulatory oversight. In the United States, the company is registered as a money services company with the Financial Crimes Enforcement Network (FinCEN) and holds “more than 40 state money transmission licenses.” CDNA is registered as a designated contract market and derivatives clearing organization with the CFTC. These registrations reflect the company’s compliance with various regulatory regimes applicable to its activities.
Crypto.com stated:
“We believe that security and compliance are the foundation for achieving mainstream cryptocurrency adoption[…]
We seek to stop the SEC’s illegal actions that exceed its authority and violate federal law.”
The company is confident that recent court rulings against the SEC’s claims against other crypto industry participants will strengthen its position. She trusts that the US legal system will monitor the SEC’s actions and validate its claims.
By challenging the SEC’s approach, Crypto.com hopes to set a precedent that clarifies the boundaries of regulation and promotes a more constructive environment for crypto companies.
For now, Crypto.com assures its customers and stakeholders that “business is as usual” as the company continues to pursue “crypto in every wallet.”
