Crypto.com has filed a lawsuit against the SEC after receiving a Wells Notice, challenging the regulator's "overreach" in its classification of cryptocurrencies like Solana and Cardano as securities.
Crypto.com has taken legal action against the U.S. Securities and Exchange Commission (SEC) after receiving a Wells Notice from the regulatory body. A Wells Notice is a formal warning indicating that the SEC may bring enforcement actions against the company for allegedly operating as an unregistered broker-dealer in its cryptocurrency transactions.
Crypto․com confirms it has received a Wells Notice from the SEC, signaling potential enforcement action ahead. pic.twitter.com/HRsYYA4ob2
— TFTC (@TFTC21) October 8, 2024
The lawsuit, filed by Crypto.com, seeks to challenge what it calls the SEC’s “overreach” into the regulation of network tokens traded on its platform. Crypto.com’s CEO, Kris Marszalek, explained the move on X (formerly Twitter), stating that the company had “no other choice” but to push back on the SEC’s “unauthorized overreach.” Marszalek also emphasized that the lawsuit aims to "protect the future of crypto in the U.S." and challenge the growing trend of "regulation by enforcement."
Crypto.com argues that the SEC’s definition of network tokens as securities excludes Bitcoin and Ethereum but has unfairly targeted other cryptocurrencies. According to the company, tokens such as Solana (SOL), Cardano (ADA), and Binance Coin (BNB), among others, are being treated similarly to Bitcoin and Ethereum in terms of trading practices, yet the SEC is categorizing them as securities.
The SEC has increased its scrutiny of the crypto industry, launching enforcement actions against several major players, including Binance, Coinbase, and Kraken, for similar regulatory violations. Crypto.com’s lawsuit follows similar resistance from other companies like Ripple, which has also challenged the SEC’s claims over what constitutes a security.
Crypto.com has also filed a petition with the SEC and the Commodity Futures Trading Commission (CFTC) seeking regulatory clarity over the treatment of cryptocurrency derivatives. The case could have broader implications for how cryptocurrencies are regulated in the U.S. as the industry continues to seek clear and bespoke rules from lawmakers and regulators.
The SEC did not provide any immediate comment on the lawsuit or Wells Notice, which was issued to Crypto.com in late August.
