Crypto.com sues US SEC after receiving legal threat from regulator

(Reuters) – Crypto.com filed a lawsuit against the U.S. Securities and Exchange Commission on Tuesday, alleging that the federal agency is overstepping its jurisdiction by regulating the cryptocurrency industry.

The crypto trading platform said its move follows the receipt of a ‘Wells notice’ from the top U.S. markets regulator, on the grounds that tokens traded on its platform qualified as securities.

A Wells notice is a formal declaration that the regulator’s staff intend to recommend an enforcement action. The SEC did not immediately respond to a request for comment.

Crypto companies have long accused the SEC of overreach and of violating its jurisdiction, while the agency has claimed that the industry is flouting securities laws intended to protect investors and other market participants.

“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,” Crypto.com said.

Retail trading platform Robinhood (NASDAQ:HOOD)’s crypto business, major U.S. crypto exchange Coinbase (NASDAQ:COIN) and NFT marketplace OpenSea are among the companies in the digital assets industry that have received similar notices from the SEC.

Crypto.com’s case, filed in a federal court in Tyler, Texas, also names SEC Chair Gary Gensler and four other commissioners as defendants.

Separately, the company has filed a petition with the Commodity Futures Trading Commission and the SEC, seeking a joint interpretation to confirm that certain cryptocurrency derivative products are exclusively regulated by the CFTC.

The CFTC did not immediately respond to a request for comment.