Crypto.com Sues SEC Over Alleged Overreach in Cryptocurrency Regulation

On October 8, Crypto.com initiated a lawsuit against the U.S. Securities and Exchange Commission (SEC), asserting that the agency is exceeding its regulatory boundaries in the cryptocurrency sector. This legal action comes after Crypto.com received a "Wells notice" from the SEC, indicating that the agency's staff plans to recommend enforcement action based on the assertion that the tokens traded on Crypto.com’s platform are securities.

A Wells notice serves as a formal indication that enforcement action is imminent. The SEC has not provided any comments regarding the lawsuit.

The cryptocurrency industry has frequently criticized the SEC for what it perceives as regulatory overreach and jurisdictional violations. Conversely, the SEC maintains that the industry is ignoring securities laws designed to protect investors and market participants.

In a statement, Crypto.com explained, "Our lawsuit argues that the SEC has unilaterally extended its jurisdiction beyond statutory limits. Additionally, we assert that the SEC has established an unlawful rule classifying nearly all crypto asset trades as securities transactions."

Other prominent entities in the digital assets industry, including Robinhood’s crypto division, Coinbase, and NFT marketplace OpenSea, have also received similar notices from the SEC.

Crypto.com’s legal challenge, filed in a federal court in Tyler, Texas, names SEC Chair Gary Gensler and four other commissioners as defendants. In a related move, Crypto.com has submitted a petition to both the Commodity Futures Trading Commission (CFTC) and the SEC, seeking a joint interpretation to clarify that certain cryptocurrency derivative products fall under the exclusive regulation of the CFTC.

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