SEC Wells Notice Is Causing a Lawsuit With Crypto.com

Key Points:

• Crypto.com received an SEC Wells notice indicating potential legal action for alleged securities violations.
• The exchange has filed a lawsuit against the SEC, accusing it of overstepping its authority and implementing rules without proper procedures.

Cryptocurrency exchange Crypto.com said that on Tuesday, it received a Wells notice from the U.S. Securities and Exchange Commission.

Read more: How To Close Crypto.com Account: Detailed Guideline

Crypto.com Wells Notice Initiated by SEC for Alleged Violations

An SEC Wells notice is an official warning that the SEC intends to file legal action against an organization for perceived violations of securities laws. Crypto.com, in response to SEC Wells notice, has filed a lawsuit against the regulator for overstepping its authority to classify most cryptocurrency transactions as securities.

Crypto.com announced this through a public statement, criticizing the move by the SEC. According to the exchange, the Crypto.com Wells notice was an unfair move because it would single it out while similar transactions of major cryptocurrencies, like Bitcoin and Ethereum, passed.

The exchange also claimed that the SEC‘s rule was promulgated in the absence of essential measures under the Administrative Procedure Act, requiring a notice-and-comment period for new regulations. According to Crypto.com, SEC Wells notice was labelled “arbitrary and capricious,” while the exchange perceives the lawsuit as part of a mounting effort to halt what it perceives as regulatory overreach.

Exchange Seeks Elucidation on Crypto Derivative Regulations

Not only that, but Crypto.com filed a petition to both the SEC and CFTC for a joint clarification that certain cryptocurrency derivatives fall solely under the purview of the latter.

The cryptocurrency industry has been at odds for years with the SEC over how to classify and regulate digital assets. The regulator has argued repeatedly that many crypto companies are working to avoid proper disclosures to investors. The agency thus has leaned on enforcement actions as a lever for forcing regulation, which is part of a strategy that many in the crypto space contend creates uncertainty and stifles growth across the industry.

Crypto.com now joins the growing list of firms within the cryptocurrency sector that received Wells notices from the SEC as a regulatory battle on the future of digital assets continues to get fierce.