Crypto.com Takes Legal Action Against SEC Over Crypto Regulations

In a bold move, Crypto.com has filed a lawsuit against the U.S. Securities and Exchange Commission (SEC), challenging what it sees as regulatory overreach in the cryptocurrency space. This legal action, initiated by Foris DAX Inc. (Crypto.com’s U.S. arm), is part of a broader industry pushback against the SEC’s approach to crypto regulation.

The lawsuit comes in response to Crypto.com receiving a Wells notice from the SEC, signaling potential enforcement action. Despite bipartisan calls for a more constructive approach to cryptocurrency regulation, the SEC’s current stance has forced companies like Crypto.com to seek clarity through the courts.

At the heart of the dispute is the SEC’s inconsistent application of securities laws to crypto assets. The agency has broadly categorized most crypto transactions as securities, while making exceptions for Bitcoin and Ethereum. This approach, according to Crypto.com, represents an unlawful expansion of the SEC’s authority beyond its legislative mandate.

Parallel to the lawsuit, Crypto.com’s affiliate CDNA has petitioned both the CFTC and SEC for a joint interpretation on cryptocurrency derivatives regulation. This move seeks to clarify whether certain crypto products fall under CFTC jurisdiction as swaps or mixed swaps.

Crypto.com emphasizes its commitment to regulatory compliance, citing its registration as a Money Services Business with FinCEN and numerous state-level licenses. The company believes its proactive approach to regulation strengthens its position in challenging the SEC’s actions.

This legal battle is not unique to Crypto.com. Other major players in the crypto industry, including Coinbase, have also taken legal action against the SEC. The Blockchain Association and Crypto Freedom Alliance of Texas have similarly challenged the SEC’s expanded “Dealer Rule” in federal court.

As the crypto industry collectively pushes back against perceived regulatory overreach, these legal actions could play a crucial role in shaping the future of cryptocurrency regulation in the United States. The outcome of Crypto.com’s lawsuit, along with similar cases, may provide much-needed clarity for the entire crypto ecosystem.