Crypto.com Has Filed Suit Against the SEC to Protect the Future of Crypto in the U.S.

Crypto.com | Derivatives North America Has Also Filed a Petition with the CFTC and SEC to Confirm Crypto Derivative Products Regulation

October 8, 2024 –  Today, Crypto.com has filed suit against the U.S. Securities and Exchange Commission (SEC). We are doing so to protect the future of the crypto industry in the U.S., joining a series of our peers who are actively defending themselves and taking action against a misguided federal agency acting beyond its authorization under the law.

Our decision to sue the SEC follows our receipt of a Wells notice from the Commission staff, illustrating that the SEC’s unauthorized and unjust regulation by enforcement campaign continues despite bipartisan indications that the next Administration will take a more constructive and effective approach to advancing crypto in the U.S. For now, improper SEC enforcement actions are part of the process of operating a legitimate and licensed crypto business in the U.S. While this is an unprecedented move for our company to file suit against a federal agency, actions by that agency towards our industry have left us no other choice.

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.

This unlawful rule never went through a notice and comment period required by the Administrative Procedure Act and furthermore the agency’s application thereof is arbitrary and capricious, particularly when those crypto assets possess virtually indistinguishable characteristics from and are sold in an identical manner as BTC and ETH.

We seek to stop the SEC’s illegal actions in excess of their authority and in violation of federal law in their tracks.

Our filing with full information on our suit is available here

Additionally, Crypto.com | Derivatives North America (CDNA) has filed a petition with the CFTC and SEC to confirm via joint interpretation that certain cryptocurrency derivative products are solely regulated by the CFTC. Crypto.com is committed to using all regulatory tools available to help bring certainty to the industry, including this petition for joint rulemaking under the Dodd-Frank Act. The joint rules allow any market participant to ask the CFTC and SEC whether a product is a “swap”, “security-based swap” or “mixed swap”. Under these joint rules, the agencies have 120 days to either issue a jointly approved interpretation (including by seeking public comment) or to deny an interpretation. However, if they deny the interpretation they must publicly provide, in writing, the reasons for not issuing the interpretation. The agencies must consult with the Federal Reserve Board of Governors (the Fed) and can also engage in joint rulemaking in consultation with the Fed.

It is important to note that in the U.S., Crypto.com is registered as a money services business with the Financial Crimes Enforcement Network (FinCEN) and maintains more than 40 state money transmitter licenses that enable our business to operate. Additionally, our affiliate CDNA is registered as a designated contract market (DCM) and derivatives clearing organization (DCO) with the CFTC. These licenses and registrations demonstrate our commitment to compliance with all of the various regulatory regimes in the U.S. that are applicable to our business.

We believe that security and compliance are the foundations of achieving mainstream cryptocurrency adoption, and all of what we do is done with safety, security and compliance at the core. We are proud to be the industry’s global leader for licenses, registrations and security certifications – maintaining more than 100 regulatory approvals to operate in jurisdictions around the world and supporting the design of regulatory frameworks built for purpose and today’s digital economy, along with best-in-class safety and security certifications. Our commitment to compliance has been our priority since the founding of Crypto.com in 2016, and we would not have been able to achieve our industry-leading position without fully maintaining that commitment.

We are confident that our internationally recognized commitment to regulatory compliance and the recent court rulings against the SEC’s claims towards crypto industry participants put us in a winning position to challenge their unjust actions. Although unfortunate, we trust the U.S. Judicial Branch will help provide the much-needed check on the current SEC leadership’s arbitrary actions against crypto and validate our claims. Our success in this matter will reaffirm our compliant operation for the benefit of our customers and the entire category in the U.S.

In the meantime, it is business as usual at Crypto.com as we continue on our pursuit of crypto in every wallet.