Cryptocom Challenges SEC in Court Following Wells Notice
Recent court decisions against the US Securities and Exchange Commission (SEC) have been highlighted by crypto exchange and service provider Crypto.com as perhaps supporting their legal dispute with the agency. Kris Marszalek, the CEO and co-founder of Crypto.com, revealed on October 8 that the exchange has sued the SEC after receiving a Wells notice from the agency. Even though the incoming US presidential administration may adopt a more constructive and effective approach to cryptocurrency, the company argues that the SEC’s action is an example of unjust and unlawful regulation.
In recent years, the SEC has lost major court battles in the cryptocurrency sector, establishing crucial precedents for businesses such as Crypto.com. In August 2024, Grayscale Investments, a crypto asset management firm, prevailed in a dispute against the SEC. A court’s decision in July 2023 that XRP is not a security when sold on digital asset exchanges was another significant decision. This decision led to XRP’s reintroduction to international exchanges following many delistings.
US Courts have provided the crypto industry much-needed relief from the SEC’s enforcement by regulation overreach by confirming what we’ve known all along — that crypto is not itself a security. These rulings against the SEC put us on strong legal footing to prevail in our suit. We trust the US Judicial Branch will ultimately provide the regulatory certainty the SEC has failed to deliver.
Crypto.com’s chief legal officer Nick Lundgren
Crypto.com Pauses Institutional Trading in U.S. After SEC Notice, Retail Services Unaffected
In March 2022, Crypto.com, which has its headquarters in Singapore, formally launched exchange services in the US, first limiting access to its platform to a small group of institutional investors. However, Crypto.com halted its institutional platform in the United States in June 2023, citing low demand. Soon after the SEC filed a lawsuit against Coinbase, a US-based exchange, for allegedly providing unregistered securities in the shape of tokens like Cardano, Solana, and others, the action was taken. According to social media discussion, Crypto.com apparently continued to provide retail services while discontinuing its institutional approach.
The SEC’s Wells notice is, by definition, a notification to a firm that the agency has determined that an accusation of securities law violations is warranted. The Wells notification that Crypto.com received does not imply that the company should cease its activities in the United States.
Wells notice is not a final determination that prevents a defendant from continuing its business. In essence, they are taking the position that what they are doing is lawful and they are going to continue to do it. If they win in court, no harm no foul.
Michael Gold, partner at Securities, Regulatory and Transactional group
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