On Tuesday, the crypto exchange Crypto.com sued the Securities and Exchange Commission (SEC) in Tyler, Texas, along with SEC chair Gary Gensler and four additional SEC commissioners, after the federal agency issued a notice of impending legal action.
“The SEC’s unauthorized overreach and unlawful rulemaking regarding crypto must stop,” Crypto.com CEO Kris Marszalek said on Twitter (now known as X).
"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.
In its Wells notice, or warning to the company of a looming lawsuit, the SEC said that the crypto exchange was operating as an unregistered broker-dealer and securities clearing agency. The company denies these allegations, claiming that cryptocurrencies are not securities under the jurisdiction of the SEC.
Crypto.com reportedly has over 80 million registered users, and was founded in Hong Kong in 2016. The company has emerged as one of the most well-known crypto exchanges in America, with the Staples Arena in Los Angeles being rebranded the Crypto.com Arena in 2021.
Crypto.com's "preemptive" lawsuit is seeking to protect the digital asset industry, which has long railed against the SEC's enforcement actions. Earlier this year, the SEC issued a notice to Robinhood about potential securities violations over its crypto division, and also informed Coinbase and OpenSea, one of the world's largest NFT marketplaces, that they were also likely to face imminent SEC enforcement actions.
Crypto.com is also asking rival agency, Commodity Futures Trading Commission (CFTC), alongside the SEC to verify that crypto derivatives are solely the domain of the CFTC.