Crypto.com Sues the SEC, Seeks Legal Clarity on Digital Asset Classification

The lawsuit targets the U.S. Securities and Exchange Commission (SEC), its Chair, Gary Gensler, and four other commissioners.

Crypto exchange Crypto.com has filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) over a Wells Notice that threatens to classify most network tokens as securities. The SEC’s move would effectively expand its jurisdiction over secondary-market sales of these tokens on Crypto.com’s platform.

The Wells Notice, issued on August 22, typically precedes enforcement actions by the SEC. It alleges that Crypto.com is operating as an unregistered broker-dealer and securities clearing agency, violating federal securities laws.

In response, Crypto.com is seeking “declaratory and injunctive relief” to prevent the SEC from extending its jurisdiction in this manner. The suit, filed by Foris DAX Inc., the legal entity behind Crypto.com, aims to protect the future of the crypto industry in the U.S., as stated by the company.

The SEC’s notice classifies most network tokens, excluding Bitcoin (BTC) and Ethereum (ETH), as securities. This broad definition has drawn criticism from the crypto industry, which argues that many tokens do not fit the criteria of a security.

Separately, Crypto.com has also filed a petition requesting a joint interpretation from the SEC and the Commodity Futures Trading Commission (CFTC) on the jurisdiction of certain cryptocurrency derivative products.

The SEC’s investigation into Crypto.com began over two years ago and became formal on March 28, 2023, according to the company’s filing.

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