SEC-scrutinized Crypto.com counters agency with lawsuit

Centralized exchange Crypto.com filed a lawsuit with the U.S. Securities and Exchange Commission shortly after receiving the Wells Notice from the agency.

The Securities and Exchange Commission issued a Wells Notice against Crypto.com, informing the digital asset trading house of possible enforcement actions. SEC prosecutors send a Wells Notice when the agency suspects securities violations have occurred. After sending notice to a firm, the SEC may or may not choose to proceed with the case.

In response to the regulatory filing, Crypto.com filed a lawsuit to prevent the SEC from unilaterally expanding its jurisdiction “beyond legal limits.”

The firm said it would join industry peers in solidarity against the securities regulator and actively defend itself against what it called a misguided federal agency. According to Crypto.com CEO Kris Marszalek, the SEC must respect court orders and control unauthorized overaccess to cryptocurrencies.

This unprecedented action by our company against a federal agency is a warranted response to the SEC’s regulation of the enforcement regime that has harmed more than 50 million American crypto holders.

— Kris | Crypto.com (@kris) October 8, 2024

Tensions between the crypto industry and the SEC have increased in recent months and heading into the US presidential election. For years, digital asset advocates have complained about the agency’s lack of clear rules.

The SEC, chaired by Gary Gensler, has consistently accused crypto businesses of ignoring and refusing to comply with securities laws. Gensler’s approach led to multiple Wells Notices being filed against firms like Uniswap, OpenSea, and Robinhood. SEC prosecutors have also taken regulatory action against Bittrex and Coinbase, among many other crypto service operators.

Despite Gensler’s relentless approach, US courts have rejected some of the SEC’s claims, including the Ripple case. The Wall Street regulator also removed the term “cryptoasset securities” from lawsuits in a proposed amended filing against Binance, acknowledging that it was never an actual term.

Additionally, the agency also retracted claims that a stablecoin issued by Paxos was an unregistered security, ending the uncertainty surrounding stablecoins in the United States.