Crypto.com launches legal action against US SEC

Cryptocurrency exchange Crypto.com has filed a lawsuit against the US Securities and Exchange Commission (SEC) following a regulatory warning that could lead to enforcement action against the company.

The legal challenge, filed on Tuesday, comes after the company received a Wells notice from the SEC in August, signalling the regulator's intention to pursue enforcement action over the trading of certain crypto tokens on its platform.

In a strongly worded statement, Crypto.com described the SEC as a "misguided federal agency" and argued that the regulator had overstepped its authority in its approach to cryptocurrency regulation.

"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," the company said in its announcement.

The lawsuit specifically challenges what Crypto.com describes as the SEC's "unlawful rule" regarding crypto asset trading. The company contends that the regulator has arbitrarily decided that nearly all cryptocurrency transactions constitute securities trading, while making exceptions for bitcoin and ether.

The legal action comes amid growing tension between cryptocurrency firms and US regulators. Last month, rival exchange Coinbase petitioned an appeals court to compel the SEC to establish clearer rules for digital assets.

Paul Grewal, chief legal officer at Coinbase, criticised the SEC's approach, stating: "Regulation by enforcement does nothing but damage American consumers, innovation, US competitiveness, and our national security."

The SEC's chairman Gary Gensler has previously defended the regulator's stance, citing three key factors: "First, existing laws and regulations apply to the crypto securities markets. Second, the SEC addresses the crypto securities markets through rulemaking as well. Third, it is important to maintain Commission discretion in setting its own rulemaking priorities."

Alongside its SEC lawsuit, Crypto.com has filed a separate petition with the Commodity Futures Trading Commission (CFTC) and SEC, seeking clarification on the regulation of certain cryptocurrency derivative products.

The company emphasised its commitment to regulatory compliance, noting that it maintains more than 40 state money transmitter licences in the US and is registered as a money services business with the Financial Crimes Enforcement Network.

The SEC has yet to respond publicly to the lawsuit. The case has been filed in a federal court, with both the regulatory body and its commissioners named as defendants.



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