- Crypto.com claims the SEC’s classification of crypto transactions as securities is overreaching and inconsistent with established norms.
- The lawsuit argues that the SEC’s new regulations lacked the necessary notice and comment period mandated by law, raising legal concerns.
- Crypto.com is committed to compliance, holding numerous licenses and registrations, reinforcing its position against the SEC’s actions.
In a bid to expose the SEC overstepping its boundaries and trying to unfairly regulate the crypto industry, Crypto.com has initiated a lawsuit against the SEC.
This comes after Crypto.com received a Wells notice from the SEC, which usually means the
Agency is planning to take enforcement action. Crypto.com is taking a stand, joining other crypto companies who are pushing back against what they see as the SEC’s overreach.
Background of the Lawsuit
Crypto.com’s lawsuit comes from concerns over the SEC’s expanding jurisdiction. The company says that the SEC has gone beyond its legal boundaries, creating an unlawful framework that calls nearly all crypto transactions securities.
This classification, they argue, doesn’t make sense since Bitcoin (BTC) and Ethereum (ETH) transactions are treated differently even though they have similar characteristics.
The lawsuit also says that this new rule didn’t go through the required notice and comment period under the Administrative Procedure Act. Crypto.com says that the SEC’s approach is arbitrary and capricious. They want to stop these unlawful actions and make regulatory practices in the crypto sector clearer.
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Regulatory Actions Taken by Crypto.com
Besides the lawsuit, Crypto.com | Derivatives North America (CDNA) has sent a request to both the SEC and the Commodity Futures Trading Commission (CFTC).
This asks for clarification on which cryptocurrency derivatives fall under CFTC jurisdiction. By asking for joint interpretation from these agencies, Crypto.com wants to establish regulatory certainty in the market.
Under the Dodd-Frank Act, the joint rules allow market participants to ask whether certain products are “swaps” or “security-based swaps.” If the agencies say no, they must explain their decision. This process requires the SEC and CFTC to work with the Federal Reserve Board of Governors (the Fed) to develop coherent regulatory frameworks.
Commitment to Compliance
It is essential to highlight that Crypto.com is a registered money services business with the Financial Crimes Enforcement Network (FinCEN). It also has more than 40 state money transmitter licenses. These licenses allow Crypto.com to work legally across the United States.
Crypto.com has also registered CDNA as a designated contract market (DCM) and derivatives clearing organization (DCO) with the CFTC. This shows the company’s commitment to following all applicable regulatory requirements. The firm has always focused on security and compliance since its founding in 2016.
Crypto.com believes its strong compliance efforts mean it’s in a good position to challenge the SEC’s actions effectively. The company is confident that recent court rulings against the SEC strengthen its case. The lawsuit aims to create a fair regulatory environment for crypto businesses in the U.S.
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