Cryptocurrency exchange Crypto.com announced Tuesday that it has filed suit against the United States Securities and Exchange Commission (SEC) after receiving a notice of impending legal action from the regulator.
In a post sharing the news. Crypto.com said that it received a Wells notice from the SEC, or a notice that the agency plans to take legal action over what it believes to be securities violations by the company.
Crypto.com is a platform that allows clients to buy and sell cryptocurrencies. It also offers a debit card which allows clients to spend digital assets and earn rewards.
The company is well known in part due to big sponsorship deals with the likes of the Ultimate Fighting Championship and Formula 1. It also has naming rights for the Los Angeles Lakers’ NBA arena, Crypto.com Arena, formerly the Staples Center.
And to use all regulatory tools available to bring certainty to the industry through proper rulemaking, https://t.co/pFc4Pz9nFR has also filed a petition with the CFTC and SEC to confirm crypto derivative products categorization.
— Kris | Crypto.com (@kris) October 8, 2024
“Our decision to sue the SEC follows our receipt of a Wells notice from the Commission staff," the Crypto.com post reads, "illustrating that the SEC’s unauthorized and unjust regulation by enforcement campaign continues despite bipartisan indications that the next Administration will take a more constructive and effective approach to advancing crypto in the U.S.”
It added: “While this is an unprecedented move for our company to file suit against a federal agency, actions by that agency towards our industry have left us no other choice.”
Crypto.com did not immediately respond to Decrypt’s questions.
In the lawsuit, Crypto.com alleged that the Wall Street regulator “invented the term Crypto Asset Security out of whole cloth to expand its jurisdiction over the digital asset industry.”
“The term has no foundation in the Securities Act or Exchange Act,” it continued, “nor does it resemble any financial instrument defined by those laws.”
The SEC has gone after major crypto companies and brands under its Chair Gary Gensler, who became head of the watchdog in 2021. Other prominent industry targets have included Coinbase, Ripple, and Uniswap.
One of the main reasons the regulator has hit companies in the digital asset space with lawsuits is because it alleges they have sold unregistered securities in the form of crypto tokens.
Crypto.com said in its lawsuit that the SEC was threatening legal action against the company “in regard to secondary-market sales of network tokens on its platform.”
Crypto.com said in its lawsuit that the SEC was threatening legal action against the company “in regard to secondary-market sales of network tokens on its platform.” The SEC targeted tokens Solana (SOL), Cardano (ADA), Binance Coin (BNB), Filecoin (FIL), Flow (FLOW), Internet Computer (ICP), Cosmos (ATOM), Algorand (ALGO), Near (NEAR), and Dash (DASH).
It further asked the court to set aside the rule allowing regulation under the Securities Act and the Exchange Act of “crypto asset securities” and enjoin the SEC from taking action against Crypto.com.
The crypto exchange added that it had filed a petition via its Derivatives North America (CDNA) division to the Commodity Futures Trading Commission (CFTC) and the SEC to confirm via joint interpretation that some digital assets are regulated by the CFTC, in a bid to “bring certainty to the industry.”
The CFTC has confirmed that both Bitcoin and Ethereum are commodities. Crypto.com argued in its suit that the tokens on its platform targeted by the SEC operate just like the two biggest digital coins.
Edited by Andrew Hayward
Editor's note: This story was updated after publication with additional details.