Crypto.com sues SEC, claiming overreach in treating most crypto trades as securities.
Crypto.com seeks CFTC confirmation to regulate certain crypto derivatives, citing Dodd-Frank.
Amidst legal battle, Crypto.com holds over 40 US state money transmitter licenses.
Crypto.com Company has filed a law suit against the U.S Securities and Exchange Commission, which may prove to be a rather large conflict that is likely to affect the activity of the cryptocurrency market in the United States significantly.
The legal proceedings, initiated by Kris Marszalek, the co-founder and chief executive officer of Crypto.com, via X on the October 8, 2024, alleges that the current outlook of SEC regulation is regultion by enforcement and that over 50 million American holders of cryptographic tokens have been harmed.
https://twitter.com/kris/status/1843642492518051978
The legal action follows the receipt of a Wells notice from the SEC, a formal indication that the agency may be considering an enforcement action against the company. Crypto.com argues that the SEC has exceeded its statutory authority by treating nearly all crypto transactions as securities trades, despite bipartisan expectations that the forthcoming administration might adopt a more favorable stance toward cryptocurrency.
Petitions for Regulatory Clarity
In addition to contesting the SEC's expansive reach, Crypto.com has proactively sought clarification from both the SEC and the Commodity Futures Trading Commission (CFTC).
The company has filed a petition requesting a joint interpretation to confirm that certain cryptocurrency derivative products should be regulated solely by the CFTC, as per provisions under the Dodd-Frank Act.
This move highlights the complexities of dual regulation in the financial sector, particularly concerning innovative products like cryptocurrencies and derivatives. The Dodd-Frank Act mandates that the SEC and CFTC have 120 days to issue a jointly approved interpretation or provide written reasons for any denial, which must involve consultation with the Federal Reserve Board of Governors.
Crypto.com’s Commitment to Compliance
Crypto.com claims several attempts to follow regulation stating that it has over 40 state money transmitter licenses and registrations with Financial Crimes Enforcement Network (FinCEN) in USA and its affiliate CDNA is registered designated contract market (DCM) and derivatives clearing organization (DCO) with CFTC. Such certifications speak to the organization compliance to regulatory requirements of the operations it undertakes.
The firm asserts that its extensive regulatory approvals and recent court decisions favoring the crypto industry strengthen its position against the SEC's actions. Crypto.com’s lawsuit aims to challenge the SEC's approach, which it views as arbitrary and capricious, especially given the identical nature of transactions involving established cryptocurrencies like Bitcoin (BTC) and Ether (ETH), which the SEC does not categorize as securities.
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