Crypto.com files lawsuit against U.S. SEC after legal threat

The crypto trading platform said its move follows the receipt of a “Wells notice” from the top U.S. markets regulator on the grounds that tokens traded on its platform qualified as securities

Crypto.com filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) on Tuesday, alleging that the federal agency is overstepping its jurisdiction by regulating the crypto currency industry.

The crypto trading platform said its move follows the receipt of a “Wells notice” from the top U.S. markets regulator on the grounds that tokens traded on its platform qualified as securities.

A Wells notice is a formal declaration that the regulator’s staff intend to recommend an enforcement action. The Securities and Exchange Commission refused to comment.

Crypto firms have long accused the Securities and Exchange Commission of overreach and of violating its jurisdiction, while the agency has claimed that the industry is flouting securities laws intended to protect investors and other market participants.

Our lawsuit contends that the SEC has unilaterally expanded its jurisdiction beyond statutory limits and separately that the Securities and Exchange Commission has established an unlawful rule that trades in nearly all crypto assets are securities transactions, Crypto.com said.

Retail trading platform Robinhood’s crypto business, major U.S. crypto exchange Coinbase and NFT marketplace OpenSea are among the firms in the digital assets industry that have received similar notices from the Securities and Exchange Commission.

Crypto.com’s case, filed in a federal court in Tyler, Texas, also names Securities and Exchange Commission Chair Gary Gensler and four other commissioners as defendants.

Separately, the firm has filed a petition with the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission, seeking a joint interpretation to confirm that certain crypto currency derivative products are exclusively regulated by the CFTC.