Crypto.com, a major cryptocurrency exchange, has filed a lawsuit against the United States Securities and Exchange Commission (SEC) for what it perceives as an overreach in regulating the crypto industry. The decision by Crypto.com to sue the SEC followed receipt of a Wells Notice from the regulator, according to a statement issued on the company’s website. The lawsuit seeks to protect the future of the digital asset industry.
A Wells Notice is a formal declaration that the regulator intends to recommend an enforcement action against the recipient. Reuters reports that Robinhood’s crypto business, major US crypto exchange Coinbase, and NFT marketplace OpenSea are among other companies in the digital assets industry that have received such notices.
Crypto.com, a Singapore-based company, stated that the SEC’s “unauthorized and unjust” actions towards the crypto industry have left no other choice than to file a suit against them. The statement claims, “Our lawsuit contends that the SEC has unilaterally expanded its jurisdiction beyond statutory limits and separately that the SEC has established an unlawful rule that trades in nearly all crypto assets are securities transactions no matter how they are sold.
The company also filed a petition with the Commodity Futures Trading Commission (CFTC) and the SEC, seeking a joint interpretation to confirm that certain cryptocurrency derivative products are solely regulated by the CFTC. The recent US regulatory crackdown on crypto businesses started after the collapse of the Bahamas-based FTX exchange in 2022, which was revealed as a Ponzi scheme used to embezzle investor funds and donate money to politicians.
Crypto companies have accused the SEC of overreach and violating its jurisdiction since then, while the agency maintains that it has the authority to regulate crypto under existing laws. The cryptocurrency-related actions taken by the SEC increased more than 50% in 2023 compared to the previous year, according to US law firm Troutman Pepper. The company anticipates this trend to continue.