SEC-scrutinized Crypto.com counters agency with lawsuit

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

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

In response to the regulatory document, Crypto.com filed a lawsuit to stop the SEC from unilaterally expanding its jurisdiction “beyond statutory limits.”

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

Tension between the crypto industry and the SEC has increased in recent months, heading toward the U.S. presidential elections. For years, digital asset proponents have lamented the agency’s lack of clear rules.

The SEC, under chair Gary Gensler, has constantly accused crypto businesses of ignoring securities laws and refusing to comply. Gensler’s approach has led to a slew of Wells Notices against firms including Uniswap, OpenSea, and Robinhood. SEC prosecutors have also taken regulatory action against Bittrex and Coinbase, among several other crypto service operators.

Despite Gensler’s unrelenting approach, U.S. courts have dismissed some SEC claims, including in the case of Ripple. The Wall Street regulator also removed the term “crypto-asset securities” from lawsuits, admitting it was never an actual term, in a proposed amended filing against Binance.

Additionally, the agency abandoned allegations that a stablecoin issued by Paxos was an unregistered security, ending uncertainty around stablecoins in America.