Crypto.com has filed a lawsuit against the United States Securities and Exchange Commission (SEC) after receiving a Wells notice, indicating the regulator’s intention to pursue legal action for alleged securities violations. The company, which offers a range of services including cryptocurrency trading and a debit card for digital asset spending, announced the lawsuit on Tuesday.
SEC’s Legal Threats and Crypto.com’s Response
The SEC’s Wells notice targets Crypto.com for its secondary-market sales of network tokens on its platform. The notice alleges that certain tokens offered by Crypto.com may constitute unregistered securities. The SEC’s scrutiny extends to prominent tokens such as Solana (SOL), Cardano (ADA), Binance Coin (BNB), and others, according to the company.
This unprecedented action by our company against a federal agency is a warranted response to the SEC’s regulation by enforcement regime which has hurt more than 50 million American crypto holders.
— Kris | Crypto.com (@kris) October 8, 2024
Crypto.com has criticised the SEC’s approach, claiming that the regulator invented the term “Crypto Asset Security” to expand its jurisdiction over the cryptocurrency industry, without any basis in existing laws. The lawsuit argues that this term does not align with any financial instrument defined by the Securities Act or the Exchange Act.
Crypto.com’s Call for Legal Clarity
In its lawsuit, Crypto.com has requested the court to invalidate the SEC’s authority to regulate “crypto asset securities” under the Securities Act and Exchange Act. The company has also asked the SEC to cease its actions against Crypto.com. In a bid for clarity, Crypto.com has petitioned the Commodity Futures Trading Commission (CFTC) and the SEC to jointly confirm whether certain digital assets fall under the CFTC’s jurisdiction.
Growing Tensions Between Crypto and Regulators
The SEC has taken legal action against several prominent firms in the digital asset sector under the leadership of Chair Gary Gensler. Other companies targeted include Coinbase, Ripple, and Uniswap. Crypto.com’s lawsuit underscores the growing tensions between the cryptocurrency industry and US regulators as both parties navigate regulatory frameworks in an evolving market.
