Crypto.com filed a lawsuit against the US Securities and Exchange Commission after receiving a Wells Notice indicating the regulator’s intention to sue the digital-asset exchange for operating as an unregistered broker-dealer and securities clearing agency.
The lawsuit contends that the regulator has “unilaterally expanded its jurisdiction beyond statutory limits and separately that the SEC has established an unlawful rule that trades in nearly all crypto assets are securities transactions no matter how they are sold,” according to a statement Tuesday by Singapore-based Crypto.com.
The SEC does not comment on the existence or nonexistence of a possible investigation, an agency spokesperson said.
The notice represents the latest in a string of enforcement actions brought by the SEC against the crypto industry in recent years. Companies including Kraken, Coinbase, Consensys and Uniswap have all been targets of such notices or lawsuits in the past, with some still engaged in legal proceedings.
“The SEC’s unauthorized overreach and unlawful rulemaking regarding crypto must stop,” Crypto.com Chief Executive Officer Kris Marszalek wrote on social media platform X.
Crypto.com, which is formally named Foris DAX Inc., declined to comment further on the lawsuit. Crypto.com was founded in 2016 in Hong Kong and rebranded to Crypto.com in 2018 after a purchase of the domain. Marszalek said in an interview with Bloomberg earlier this year that its platform has more than 80 million registered users.
The lawsuit seeks to prevent the SEC from “unlawfully expanding its jurisdiction to cover secondary-market sales of certain network tokens sold on Crypto.com’s platform.” CRO, the token of Cronos blockchain developed by Crypto.com, fell 7.6%, according to data from tracker CoinGecko.
In April, Consensys sued the SEC in federal court in Texas to fend off regulation of the Ethereum blockchain and push back against the SEC’s “campaign to seize control over the future of cryptocurrency,” as the firm disclosed it received a Wells Notice. A federal judge tossed the suit in September. The SEC sued the operator of the popular crypto wallet MetaMask in June.
Crypto.com’s North American derivatives unit also filed a petition with the Commodities Futures Trading Commission and SEC seeking to confirm by joint interpretation that certain crypto derivative products are solely regulated by the CFTC.
“It’s not surprising to see many crypto businesses turning the tables and preemptively suing the SEC,” Michael Selig, partner at Willkie Farr & Gallagher LLP, wrote on X, commenting on Crypto.com’s lawsuit.
(Add details on Consensys’ lawsuit in the eighth paragraph.)