On Tuesday, digital asset exchange Crypto.com became the latest target of the US Securities and Exchange Commission (SEC), which has been increasingly employing a regulation-by-enforcement strategy over the past year. This latest action follows the SEC’s previous scrutiny of trading platforms, including Robinhood, just a few months ago.
Crypto.com Accuses SEC Of Overreach
In response to receiving a Wells Notice from the SEC, Crypto.com has filed a lawsuit against the regulatory body, aiming to safeguard the future of the cryptocurrency industry in the United States. In its statement, Crypto.com emphasized the necessity of the legal action, stating:
We are doing so to protect the future of the crypto industry in the US, joining a series of our peers who are actively defending themselves against a misguided federal agency acting beyond its authorization under the law.
The exchange argues that the SEC is overstepping its jurisdiction and has unilaterally expanded its authority to classify nearly all cryptocurrency transactions as securities, except for those involving Bitcoin (BTC) and Ethereum (ETH).
This distinction, they claim, lacks a solid legal basis and fails to adhere to required regulatory procedures, including the notice-and-comment rule mandated by the Administrative Procedure Act.
Crypto.com contends that the SEC’s enforcement actions are “arbitrary and capricious,” particularly given that many cryptocurrencies share characteristics and transactional methods similar to those of BTC and ETH. The exchange seeks to halt what it describes as the SEC’s unlawful activities that exceed its statutory authority and violate federal law.
Push For CFTC Oversight Of Crypto Derivatives
In addition to the lawsuit, Crypto.com | Derivatives North America (CDNA) has filed a petition with both the Securities and Exchange Commission and the Commodity Futures Trading Commission (CFTC).
This petition aims to clarify the regulatory framework governing certain cryptocurrency derivative products, advocating for a joint interpretation that would designate these products as solely under the jurisdiction of the CFTC.
The agencies involved have 120 days to respond, either by issuing a jointly approved interpretation or by providing written reasons for any denial.
At the time of writing, Crypto.com’s ecosystem token Cronos (CRO) is trading at $0.075, down 5% in the last hour.
Featured image from DALL-E, chart from TradingView.com
