SEC and Crypto Startup in Legal Battle Over Crypto's Classification
Lejilex, a Texas-based crypto startup, has initiated a legal battle against the U.S. Securities and Exchange Commission (SEC), seeking a preemptive ruling regarding its planned crypto exchange.
The company aims to clarify that its operations will not violate securities laws, asserting that it intends to facilitate crypto transactions rather than sell securities.
In its October 3 brief filed in a Texas federal court, Lejilex accused the SEC of overreaching its regulatory authority, claiming that the agency's view of digital assets as securities represents a "massive regulatory land grab."
The firm, part of the Crypto Freedom Alliance of Texas, was established last year and plans to launch its exchange by the end of 2024.
The SEC, however, argues that the lawsuit seeks to establish that crypto can never be classified as securities. It raised concerns about Lejilex's standing, noting that the startup has not faced any enforcement actions from the agency.
The SEC contends that the classification of a digital asset as a security is not determined solely by the nature of the asset.
On October 4, Coinbase's chief legal officer, Paul Grewal, criticized the SEC's contradictory statements regarding the classification of digital asset transactions. He highlighted inconsistencies in the SEC's arguments, particularly in light of the ongoing lawsuit against Coinbase, which the agency claims sold unregistered securities.
Additionally, Ripple executives have voiced their concerns regarding the SECâs appeal of a 2023 court ruling which determined that secondary sales of XRP do not constitute securities.
Critics, including Republican Senate candidate John Deaton, have expressed frustration over what they perceive as an anti-crypto agenda, suggesting that the SEC's actions lead to unnecessary expenditures of taxpayer money.
