Singapore-based cryptocurrency exchange Crypto.com has initiated a lawsuit against the US SEC after receiving a legal threat from the regulator. This action aligns with similar measures taken by other industry players who are challenging what they perceive as overreach by the SEC.

The lawsuit follows the issuance of a Wells notice from SEC staff, and while Crypto.com asserts that pursuing legal action against a federal agency is unprecedented for them, they expressed that they felt compelled to respond to the SEC's treatment of the industry. The main point of the lawsuit is the assertion that the SEC has extended its jurisdiction beyond what is legally permissible. Furthermore, the lawsuit claims the SEC has implemented an unlawful rule categorising nearly all cryptocurrency trades as securities transactions, while treating transactions in Bitcoin and Ethereum differently, despite their similar characteristics.

This rule was allegedly established without the necessary notice and comment period mandated by the Administrative Procedure Act. Crypto.com argues that the SEC's application of this rule is inconsistent and lacks justification, particularly as other crypto assets are sold in a manner comparable to BTC and ETH. The company is seeking to halt what it describes as the SEC's illegal overreach and violations of federal law.

In addition, Crypto.com has submitted a petition to both the Commodity Futures Trading Commission (CFTC) and the SEC. This petition requests a joint interpretation to clarify that certain cryptocurrency derivative products fall under the exclusive jurisdiction of the CFTC. Crypto.com emphasises its intention to leverage all available regulatory avenues to provide clarity to the industry.

The petition is guided by the Dodd-Frank Act, which allows market participants to inquire whether specific products qualify as swaps or securities-based swaps. More information about Crypto.com In the context of regulatory compliance, Crypto.com is registered as a money services business with the Financial Crimes Enforcement Network (FinCEN) and holds over 40 state money transmitter licences, enabling its operations across the US. Additionally, its affiliate, CDNA, is registered as both a designated contract market and a derivatives clearing organisation with the CFTC.

Crypto.com expressed confidence in its adherence to regulatory standards and the recent judicial rulings against the SEC’s claims. They also highlighted their hope that the US judicial system will act as a check on the SEC’s current approach. Source: Link .