In a significant legal move, Crypto.com has filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) after receiving a Wells notice, which indicates that the SEC staff believes the company may have violated federal securities laws.
On October 8, 2024, Crypto.com confirmed that it had received a Wells notice from the SEC, typically seen as a precursor to enforcement action. The notice suggests that SEC staff intends to recommend bringing legal action against Crypto.com based on allegations that certain network tokens sold on its platform qualify as securities under U.S. law.
The SEC’s position is that Crypto.com’s transactions involving various cryptocurrencies could be subject to securities regulations, which would impose stringent compliance requirements on the platform. The SEC has been increasingly aggressive in its enforcement actions against cryptocurrency companies, asserting that many digital assets should be classified as securities.
In response to the SEC’s actions, Crypto.com has initiated legal proceedings, arguing that the regulator has overstepped its statutory authority. The company contends that the SEC’s broad interpretation of securities laws unfairly categorizes nearly all crypto transactions as securities while exempting similar transactions involving Bitcoin (BTC) and Ether (ETH).
The lawsuit asserts that the SEC’s rule-making process violated the Administrative Procedure Act by failing to provide the necessary notice and comment period before implementing regulations affecting the crypto industry. Crypto.com describes this enforcement approach as “arbitrary and capricious,” arguing that it undermines innovation and consumer protection in the rapidly evolving digital asset space.
Crypto.com has criticized the SEC for not providing a comprehensive list of which tokens it considers to be securities. Instead, the company claims it has been directed to review other enforcement actions without clear guidance on compliance.
