Amidst increased scrutiny from the U.S. Securities and Exchange Commission (SEC) towards various cryptocurrency platforms, Crypto.com is embroiled in a legal battle with the regulatory body.
On the 8th of October, the exchange announced its decision to file a lawsuit against the SEC following the reception of a Wells Notice, which acts as an initial warning of possible charges.
Dated August 22nd, this notice indicates the SEC’s potential enforcement actions against Crypto.com, adding another layer to the ongoing sequence of regulatory hurdles encountered by the crypto sector.
Crypto.com’s Legal Action Against the SEC
Discussing this development, Kris Marszalek, the co-founder and CEO of Crypto.com, publicly disclosed the company’s lawsuit against the SEC through X (formerly Twitter), stating,
“Our decision to take legal action against a federal agency is a justified response to the SEC’s enforcement-focused regulatory approach, which has negatively impacted over 50 million American crypto investors.”
Expanding on this move, Crypto.com’s official statement outlined the reasoning behind the lawsuit, emphasizing,
“Our objective is to safeguard the future of the U.S. crypto industry, aligning with other industry players actively defending themselves and challenging the overreaching actions of a federal agency operating outside its legal boundaries.”
Concerns Over SEC’s Regulatory Scope
It is evident that since 2021, under the helm of Chair Gary Gensler, the SEC has increasingly focused on prominent cryptocurrency entities such as Coinbase, Ripple [XRP], and Uniswap.
This pattern persists as shown in a recent clash involving Consensys, where Laura Brookover, Senior Counsel and Head of Litigation and Investigations, addressed the ongoing scrutiny and remarked,
“It is imperative that these critical issues within our industry come to light.”
Similarly, Crypto.com has voiced apprehensions regarding the SEC’s regulatory tactics, claiming that the agency has “put forward an illegitimate rule deeming trades involving nearly all crypto assets as securities transactions, irrespective of method of sale.”
Echoing similar concerns was Marszalek, who stated,
“The SEC’s unwarranted overreach and unauthorized rule-making in the realm of crypto need to cease.”
Scrutiny on Gensler’s Leadership
This situation has prompted questions about Gensler’s leadership at the SEC, with Representative Tom Emmer and House Financial Services Committee Chairman Patrick McHenry expressing reservations in a letter dated September 17th.
While Gensler defended the SEC’s approach of “regulation through enforcement,” arguing that many cryptocurrency actors do not comply with existing securities regulations, he faced criticism from his colleagues within the agency.
Consequently, these ongoing tensions underscore the challenges of overseeing the rapidly evolving crypto sphere and highlight the urgent necessity for clearer regulatory frameworks.