Crypto Firm Files Lawsuit Against SEC After Receiving Wells Notice

Crypto.com has initiated legal proceedings against the U.S. Securities and Exchange Commission (SEC), becoming part of an increasing number of cryptocurrency firms challenging the regulatory authority’s stance on crypto assets.

This lawsuit is a reaction to what Crypto.com perceives as the SEC’s overreach in regulating the cryptocurrency sector. Currently, the company reassures its customers that business operations will proceed as normal while it contests the SEC’s position in court.

The action follows the receipt of a Wells notice from the SEC, signaling potential enforcement action. However, it is important to note that receiving such a notice does not imply that the company has committed any wrongdoing.

Crypto.com contends that the SEC’s actions exceed its legal authority, particularly as political leaders suggest that future administrations may be more amenable to the cryptocurrency landscape.

Other entities in the crypto space, including the NFT marketplace OpenSea, exchanges like Coinbase and Kraken, and the trading app Robinhood, have also received similar Wells notices.

In the lawsuit, Crypto.com asserts that the SEC has improperly expanded its jurisdiction by categorizing most crypto assets as securities while excluding prominent assets like Bitcoin and Ethereum. The firm argues that this classification was made without appropriate legal procedures and lacks consistent reasoning, noting that transactions in many crypto assets are similar to those of Bitcoin and Ethereum.

Additionally, Crypto.com has filed a petition with both the Commodity Futures Trading Commission (CFTC) and the SEC to clarify which agency holds regulatory authority over certain cryptocurrency derivatives. The exchange argues that such products should be under the CFTC’s jurisdiction, aiming for clearer regulatory guidelines in the industry.

The exchange highlighted its compliance with the Financial Crimes Enforcement Network (FinCEN) regulations and its possession of over 40 state money transmitter licenses in the United States. It also referenced its designation as a contract market and clearing organization with the CFTC.

Crypto.com emphasized its status as a leader in the industry concerning licenses, registrations, and security certifications, stating it holds more than 100 regulatory approvals to operate globally and contributes to the creation of regulatory frameworks suited for today’s digital economy.

In September, Crypto.com experienced a significant surge in trading volume, with both spot and derivatives trading increasing by over 40% compared to the previous month. This year, the exchange has achieved the largest growth in spot trading, elevating its market share to 10.5%.