Crypto.com Sues US SEC Following Wells Notice From Commission

Today, Crypto.com took it a step further and filed a lawsuit against the US Securities and Exchange Commission.

The new lawsuit filed against the SEC was by Foris DAX Inc., a Delaware-incorporated corporation doing business as Crypto.com. Foris DAX operates the US arm for it, and this suit is part of the wider pushback that the firm has been waging against what it considers overreach by the SEC.

It’s an action to preserve the future of the crypto industry in the United States by joining other crypto firms pushing back against overreach by a federal agency acting beyond its authorized powers.

Crypto.com Sues SEC Over “Unlawful” Crypto Rules

The case where Crypto.com decided to sue SEC follows it’s receipt of a Wells notice from the SEC, signaling continued regulatory pressure through enforcement rather than clear guidelines.

Despite signals from bipartisan voices that the next administration might adopt a more constructive approach to cryptocurrency, the SEC’s current stance-often exceeding its legal boundaries-leaves businesses like this company with no choice but to challenge these actions in court.

The basic gist is that the SEC unilaterally expands its jurisdiction to make most crypto asset transactions securities but then makes Bitcoin and Ethereum exceptions. Even the SEC’s head Gary Gensler recently claimed that Bitcoin does not qualify as a security under US law.

The company’s legal argument reduces to the degree to which such an approach has been unlawful in a very inconsistent expansion of the SEC’s authority beyond that set by legislation. That becomes a very pivotal moment for the company, standing up against what many in the industry call regulatory overreach, and earning its place in the American crypto space.

Crypto.com Takes Proactive Approach to Derivatives Regulation

Meanwhile, besides the ongoing lawsuit filed against the SEC, Crypto.com’s affiliate – CDNA, has filed a petition with both the CFTC and the SEC. It requests from the agencies a joint interpretation that certain cryptocurrency derivatives products fall exclusively under CFTC regulation.

This filing is part of Crypto.com’s continuing effort to bring some clarity to the regulatory environment using all legal opportunities, including the joint rulemaking process provided by the Dodd-Frank Act.

It requests explicitly that these products be identified as “swaps,” “security-based swaps,” or “mixed swaps.” Under Dodd-Frank, agencies are compelled to respond with a determination within 120 days, and if they fail to act, they must publish a written statement explaining their reasons for inaction.

The company stated:

“We are confident that our internationally recognized commitment to regulatory compliance and the recent court rulings against the SEC’s claims towards crypto industry participants put us in a winning position to challenge their unjust actions.

Although unfortunate, we trust the US Judicial Branch will help provide the much-needed check on the current SEC leadership’s arbitrary actions against crypto and validate our claims. Our success in this matter will reaffirm our compliant operation for the benefit of our customers and the entire category in the US.”

By all means, Crypto.com’s seriousness about following regulations is underlined by the number of licenses and registrations it has obtained. In the US, it is registered as a Money Services Business with FinCEN, and it boasts more than 40 State Money Transmitter Licenses.

Its affiliate, CDNA, is further registered with the CFTC as both a DCM and a DCO. With these, it shows that the company is committed to compliance with US regulatory requirements and is proactive in seeking clarification of the confusing issues at stake for the crypto-derivatives market.

Crypto Industry Fights Back Against SEC

Be it as it may, Crypto.com isn’t the only company that decided to put charges on SEC. Coinbase, the largest US-based cryptocurrency exchange, sued the SEC last year to compel the regulator to take action on a petition for rulemaking Coinbase filed with the agency in 2022.

Also, recently Paul Grewal, Chief Legal Officer at Coinbase, has identified inconsistencies in key legal assertions made by the SEC. His observations stem from the recent developments surrounding the Lejilex lawsuit, which prompted the SEC to file a reply brief.

Grewal argues that the SEC’s claims may not align with established legal principles, raising concerns about the regulator’s approach to enforcing its regulations within the cryptocurrency space

In April this year, two of the most prominent organizations in the crypto industry, Blockchain Association and Crypto Freedom Alliance of Texas, also filed a lawsuit against theSEC in Texas federal court. They sued over the commission’s new “Dealer Rule” this month that expands the definition of a “dealer” to include those who deal in digital assets.

The plaintiffs, therefore, argue that this is an overreach rule since it would result in undue regulatory burdens on the cryptocurrency firms by unnecessarily expanding the SEC’s oversight responsibility more than what the law has authorized.

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Teuta

Teuta is a seasoned writer and editor with over 15 years of experience in macroeconomics, technology, and the cryptocurrency and blockchain industries. Starting her career in 2005 as a lifestyle writer for Cosmopolitan in Croatia, she expanded into covering business and economy for several esteemed publications like Forbes and Bloomberg. Influenced by figures like Don Tapscott and Bruce Dickinson, Teuta embraced the blockchain revolution, believing crypto to be one of humanity’s most crucial inventions. Her fintech involvement began in 2014, focusing on crypto, blockchain, NFTs, and Web3. Known for her excellent teamwork and communication skills, Teuta holds a double MA in Political Science and Law, enjoys punk rock, chablis, and has a passion for shoes.

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