The US Securities and Exchange Commission (SEC) has had a lawsuit filed against it by Crypto.com citing “unauthorised and unjust regulation by enforcement”.
Crypto.com filed the suit against the US financial regulator yesterday after receiving a Wells notice from the SEC on 22 August, a preliminary warning that can lead to enforcement action.
Much of the SEC’s Wells notice against Crypto.com mirrors that of its cases against a large majority of crypto companies within the US, such as Binance, Coinbase, Ripple Labs, etc., that the tokens circulating on those exchanges are securities and therefore need to be registered as financial instruments.
This has been the main focal point of the SEC’s enforcement action against the aforementioned and plethora of other crypto companies.
Crypto.com, much like Coinbase, filed a suit against the financial agency as the company believes that its enforcement of its rulings against much of the crypto sector is “misguided” and goes beyond its authorisation.
As for the reasoning behind the suit, Crypto.com revealed whilst it is an “unprecedented” move from the company, the Wells notice left the exchange with no other choice than to take its own action.
A statement read: “For now, improper SEC enforcement actions are part of the process of operating a legitimate and licensed crypto business in the US. While this is an unprecedented move for our company to file suit against a federal agency, actions by that agency towards our industry have left us no other choice.
“Our decision to sue the SEC follows our receipt of a Wells notice from the Commission staff, illustrating that the SEC’s unauthorised and unjust regulation by enforcement campaign continues despite bipartisan indications that the next Administration will take a more constructive and effective approach to advancing crypto in the US.”
A focus of the suit against the SEC pertains to its enforcement of the belief that crypto and digital assets should fall under securities law. However, Crypto.com contends that the agency has allowed Bitcoin and Ethereum to not fall in line with this assertion, in large part to both cryptocurrencies launching as ETFs this year.
The global exchange also highlights the Administrative Procedure Act pertaining to SEC’s “unlawful” securities rule related to digital assets that can be viewed as “arbitrary and capricious”.
“We seek to stop the SEC’s illegal actions in excess of their authority and in violation of federal law in their tracks,” continued Crypto.com in its statement.
Lack of regulatory clarity has often been a main talking point for companies like Crypto.com and Coinbase in the US under the Democratic Administration and under the oversight of SEC Chair Gary Gensler.
This has not been the case in other jurisdictions however. Crypto.com has been able to obtain regulatory clearances in countries such as the UK, Ireland, Dubai, and more via obtaining a licence that enables the company to offer its derivatives services.
Crypto.com notes that it is registered as a money services business with the US Financial Crimes Enforcement Network, with more than 40 state money transmitter licence to be able to operate in.
The statement said: “We believe that security and compliance are the foundations of achieving mainstream cryptocurrency adoption, and all of what we do is done with safety, security and compliance at the core.
“We are proud to be the industry’s global leader for licences, registrations and security certifications – maintaining more than 100 regulatory approvals to operate in jurisdictions around the world and supporting the design of regulatory frameworks built for purpose and today’s digital economy, along with best-in-class safety and security certifications.”
What is more interesting in the Crypto.com statement is the acknowledgement of the “bipartisan indications that the next Administration will take a more constructive and effective approach to advancing crypto in the US”.
Whilst both the Democratic and Republican parties have seemingly agreed to advance the crypto sector in the US under the new Presidential term, candidate Donald Trump has been publicly vocal on his backing of crypto, in particular Bitcoin, making it a core discussion of his Presidential campaign.
