Leading crypto exchange and brokerage company, Crypto.com, has filed a lawsuit against the U.S. Securities and Exchange Commission (SEC).
In a statement released on Tuesday, the crypto exchange confirmed that it had received a Wells notice from the financial regulator. In response, the company decided to file a lawsuit contesting the SEC’s actions.
Crypto.com also stated that the inspiration behind their move to take the financial watchdog to court was the fact that other crypto firms have recently contested the SEC’s actions.
For example, Kraken, which has been facing a lawsuit filed by the SEC since last year, opted for a jury trial instead of a settlement. In its request for a jury trial, Kraken denied all allegations and argued that the SEC was acting beyond its lawful authority and that it has not provided clear guidance on what constitutes a security.
Why Did Crypto.com File a Lawsuit Against the SEC?
Crypto companies in the U.S. are finding it increasingly difficult to operate in the country due to regulatory uncertainty. As to why the company decided to file a lawsuit, Crypto.com said: “For now, improper SEC enforcement actions are part of the process of operating a legitimate and licensed crypto business in the U.S. While this is an unprecedented move for our company to file suit against a federal agency, actions by that agency toward our industry have left us no other choice.”
The allegations and contentions raised in Crypto.com’s filings are very similar to those made by Kraken in its filing for a jury trial last month.
Explaining what the lawsuit contends, Crypto.com said in its statement: “The SEC has unilaterally expanded its jurisdiction beyond statutory limits, and separately, the SEC has established an unlawful rule that trades in nearly all crypto assets are securities transactions no matter how they are sold, whereas identical transactions in bitcoin (BTC) and ether (ETH) are somehow not.”
Crypto.com also confirmed that its operations in the U.S. will continue as usual. However, for eToro, which decided to settle with the SEC, the crypto broker had to wrap up its business in the country.
Crypto.com’s Lawsuit Is Unprecedented and Here’s Why It Matters
A crypto exchange filing a lawsuit against a regulatory authority, and particularly against the U.S. SEC, is unprecedented. This could be of significant importance as it shows how crypto firms are now taking a stand, calling out the aggressive behavior of the financial regulator, which has made it extremely difficult for crypto brokerages and exchanges to operate in the country and cater to the American public.
So far, there is no clarity on how and what the SEC classifies as “securities.” Amid the lack of a clear regulatory framework, it is also unclear who has the authority to decide what qualifies as a security. The lawsuit by Crypto.com could help answer these questions, which the crypto exchange has raised in its filing.
As crypto has become an important issue that many believe could impact the U.S. presidential elections in November, we can expect some progress regarding crypto regulations in the country regardless of the election results. The lawsuit filed by Crypto.com shows how crypto companies have been left with no choice and have been pushed to a point where they are now ready to take on the SEC.
