SEC's Regulatory Authority Over Crypto Challenged; Lawsuits Filed

Lawsuits from Green United LLC and others openly challenge the supremacy of the U.S. SEC on regulating crypto assets. The recent crackdown on the crypto industry by the financial watchdog of the United States Securities and Exchange Commission (SEC) sets a flawed premise. The agency has been fighting legal wars with Ripple since December 2020 and many others recently.

SEC’s Regulatory Authority Over Digital Assets Challenged

The regulatory body filed claims against Utah-based Green United, LLC alleging that they duped customers by offering unregistered crypto assets. The complaint highlights that the defendant raised $18 Million through the selling of ‘‘Green Boxes’ & ‘‘Green Nodes.’’

The suit also alleged that, per company claims, the product should have been mining GREEN tokens but instead mined Bitcoin. Here SEC asserts that the mined currency was not transferred to investors.

Green United LLC, its principal Wright Thurston and promoter Kristoffer Krohn, and some others challenged the SEC lawsuit on May 26, 2023. The premise behind the suit is that it is based on the lack of authority of the agency in asserting its claims.

Green United filed a motion to dismiss the case, arguing that the financial watchdog lacks authority. Also, it claimed that the U.S. Congress rejected its granting authority required to fight the case. They claimed that the agency needed to clarify ambiguity and consistency in its definition of cryptocurrency.

Coinbase also challenged the agency in a petition. It is one of the biggest crypto exchanges in the country. The exchange filed a petition in April 2023 against SEC in the Third Circuit Court of Appeals. The reason behind the petition is to force the agency to provide regulatory clarity & required guidance for the crypto industry.

The SEC is yet to respond to the rule-making petition because, per Coinbase, the agency has “its mind made up to deny the petition.” Further arguing over the matter, the spokesperson said the delay in formally announcing their decision is causing delays in the critical scenario.

Coinbase was issued Wells Notice, informing that the agency can take action against the exchange regarding unregistered securities. The exchange is looking at legal options to defend itself. It also argues that SEC’s “words and actions” previously showed that digital assets do not fall under securities laws. But a sudden change in momentum is disruptive.

Coinbase is asking for clarity on which assets should be registered as securities and how cryptocurrency registration requirements apply. Reports suggest that over 1,700 market participants voted in favor of required transparency, as the regulatory landscape of the United States is murky.

On May 24, 2023, the Third Circuit Court of Appeals ordered the SEC to respond to the petition within ten days.

The SEC has waged war on the crypto industry and its case against Ripple has been its biggest and longest battle. The recent crackdown on the likes of Coinbase and others regarding unregistered securities is troubling. Also, the agency is trying to redefine and expand its definition of “Exchange” to bring crypto exchanges under its umbrella.

The agency is believed to be right on its path as they are trying to protect U.S. citizens from the ill effects of the crypto industry. But its enforcement style is only welcomed by some. Many crypto companies are looking to go offshore, citing a hostile regulatory environment.

Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing