Crypto.com Sues US SEC Alleging Overreach in Cryptocurrency Regulation

Highlights:

• Crypto.com sues the US SEC, alleging the agency overstepped its authority in regulating cryptocurrencies.
• The lawsuit contends the SEC unlawfully classifies most crypto assets as securities, except Bitcoin and Ether.
• Crypto.com seeks to halt the SEC’s actions and filed a petition with the CFTC for regulatory clarity.

Crypto.com sues US SEC, alleging that the agency has overstepped its authority in regulating the cryptocurrency industry. According to the statement on October 8, after receiving a Wells notice from the SEC, which signals potential enforcement action, Crypto.com decided to take legal steps. This move aims to protect the future of crypto in the United States by challenging the SEC’s approach.

Crypto.com contends this classification is inconsistent and lacks lawful basis. The company stated, “This unlawful rule never went through a notice and comment period. Furthermore, the agency’s application is arbitrary and capricious.” The company notes that other crypto assets have characteristics similar to those of BTC and ETH. They are also sold in the same manner.

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

Moreover, Crypto.com asserts that the SEC implemented this rule without following the required notice and comment period mandated by the Administrative Procedure Act. The company believes the SEC’s actions are unlawful and harm the crypto industry and its participants. By filing this lawsuit, Crypto.com sues US SEC to halt actions deemed in excess of the agency’s authority and in violation of federal law.

Alleges Unlawful Classification of Crypto Assets as Securities

Crypto.com highlights that other crypto assets possess characteristics virtually indistinguishable from BTC and ETH. The company contends that identically selling these assets should not subject them to different regulatory treatment. The SEC’s stance creates uncertainty and hinders the operation of legitimate crypto businesses. Crypto.com seeks to stop the SEC’s actions that it considers illegal and beyond the agency’s authorized power.

The company’s legal action aligns with steps taken by other industry participants who have received Wells notices from the SEC. Firms like Coinbase and Robinhood’s crypto division have also faced regulatory challenges. Crypto.com believes that recent court rulings against the SEC’s claims support its position. It trusts that the judicial system will provide a necessary check on the SEC’s actions.

The SEC just sent a Wells notice to Robinhood.

The number they've sent about crypto in recent months is astonishing. It's hard to imagine that they would (or could) bring so many enforcement actions at once.

It seems like they're abusing the Wells process as a scare tactic now.

— Jake Chervinsky (@jchervinsky) May 6, 2024

Seeks Regulatory Clarity Through Petition to CFTC and SEC

In addition to the lawsuit, Crypto.com has taken steps to seek regulatory clarity. Its affiliate, Crypto.com Derivatives North America (CDNA), filed a petition with both the Commodity Futures Trading Commission (CFTC) and the SEC. The petition requests a joint interpretation to confirm that certain cryptocurrency derivative products are regulated solely by the CFTC. Under the Dodd-Frank Act, the agencies have 120 days to respond to such petitions.

Crypto.com emphasizes its dedication to regulatory compliance and oversight. The company is registered as a money services business in the United States with the Financial Crimes Enforcement Network (FinCEN). It holds more than 40 state money transmitter licenses, allowing it to operate across the country. In addition, CDNA is recognized as a designated contract market and a derivatives clearing organization by the CFTC.

The company maintains over 100 regulatory approvals to operate in jurisdictions worldwide. It continues to support the design of regulatory frameworks suited for the digital economy. Crypto.com states that security and compliance are the foundations for mainstream cryptocurrency adoption.

Despite the legal proceedings, Crypto.com assures its customers and stakeholders that it is business as usual. The company continues its operations while pursuing its goal of “crypto in every wallet.” By taking legal action, Crypto.com sues the US SEC to reaffirm its compliant operation for the benefit of its customers and the entire crypto industry in the United States.