Crypto.com Takes Legal Action Against SEC Over Wells Notice

Crypto(.)com filed a lawsuit against the U.S. Securities and Exchange Commission (SEC). This action stems from the receipt of a Wells Notice from the SEC, which the company views as part of a broader, unjust enforcement campaign targeting the cryptocurrency industry.

The lawsuit claims the SEC is overstepping its jurisdiction and enforcing unauthorized regulations that could harm the crypto sector. 

“Specifically, our lawsuit contends that the SEC has unilaterally expanded its jurisdiction beyond statutory limits and separately that the SEC has established an unlawful rule that trades in nearly all crypto assets are securities transactions no matter how they are sold, whereas identical transactions in bitcoin (BTC) and ether (ETH) are somehow not,” the firm noted in a statement.

Legal Showdown Between Crypto.com and the SEC

In its lawsuit, Crypto(.)com argues that the SEC has overextended its legal authority by classifying most cryptocurrencies as securities without proper rulemaking or congressional approval.

According to Crypto(.)com, this approach is harmful to the broader crypto ecosystem in the U.S., creating uncertainty for businesses operating within legal frameworks. 

“We are doing this to protect the future of the crypto industry in the U.S.," the company said in its statement, joining other crypto firms fighting back against what they perceive as the SEC’s regulatory overreach.

The suit claims that the SEC invented a new category, "Crypto Asset Security," without following the proper rulemaking procedures outlined in the Administrative Procedure Act (APA). Crypto.com believes this unauthorized expansion has created confusion and hindered lawful businesses from operating efficiently.

Seeking Regulatory Clarity

In addition to the lawsuit, Crypto(.)com has filed a petition with the Commodity Futures Trading Commission (CFTC) and the SEC. This petition seeks clarification on which agency regulates certain cryptocurrency derivatives. 

Specifically, the firm aims to confirm that certain digital products fall solely under the CFTC's jurisdiction, reflecting the company's broader effort to bring regulatory certainty to the industry.

Despite the legal battle, Crypto(.)com maintained its continued focus on compliance. The company is registered as a money services business with the Financial Crimes Enforcement Network (FinCEN) and holds over 40 state money transmitter licenses, along with multiple licenses globally.

“Our compliance and security efforts are at the core of our operations, and we remain committed to working within regulatory frameworks,” Crypto.com noted.

The Crypto(.)com lawsuit is part of a larger pushback by the crypto industry against what it perceives as unjust regulatory enforcement by the SEC. For instance, last April, the SEC notified Decentralized Crypto Exchange Uniswap it intends to initiate enforcement action against the firm.