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Cryptocurrency exchange Crypto.com has warned it faces a lawsuit from the US securities regulator over selling unregistered tokens and has sued the agency for allegedly overstepping its authority.
The Singapore-based exchange said on Tuesday it had received a so-called Wells notice, which warns that a company may soon face legal action, from the Securities and Exchange Commission.
It has become the latest crypto company caught in the crosshairs of the SEC, which has been pursuing many of the industry’s biggest names for allegedly violating US securities laws by offering unregistered securities.
The regulator has launched cases against exchanges Coinbase, Kraken, Binance and Gemini, payments provider Ripple Labs and blockchain software company Consensys. Robinhood, the broker, said in May that it too had received a Wells notice.
But Crypto.com said was launching its own legal proceedings against the watchdog “to protect the future of the crypto industry in the US”.
“The SEC’s unauthorised over-reach and unlawful rulemaking regarding crypto must stop,” said Kris Marszalek, chief executive of Crypto.com.
Crypto executives and investors have branded the SEC’s approach “regulation by enforcement” and many of them have rallied to publicly and financially back Donald Trump’s bid for the US presidency, hoping he will usher in a more crypto-friendly era.
The Republican nominee has vowed to sack Gary Gensler, head of the SEC, and end “persecution” of the crypto sector, while also launching his own digital assets company.
Crypto.com said it was being pursued by the SEC over its sale of 10 so-called network tokens, which are coins linked to a specific blockchain. These include the solana, cardano and Binance’s BNB tokens, it said, arguing that these tokens should not be treated differently to popular coins bitcoin and ether.
“The SEC does not have jurisdiction over those sales and cannot lawfully regulate [them]”, Crypto.com said in the lawsuit, which was filed against the SEC, Gensler and the four other SEC commissioners.
The exchange group was founded in 2016 and offers trading of more than 350 digital assets, as well as a prepaid Visa card. The company focuses on retail traders and has sponsored many entertainment events, including the Champions League football tournament, Formula One racing, and recently ran a commercial with rapper Eminem.
“We continue to be very bullish on the US crypto market and our imminent plans to expand our offerings to US customers,” Marszalek said on X.
The company said it had also filed a petition with the SEC and Commodity Futures Trading Commission to press for certain crypto derivative products to be only regulated by the CFTC.
In June 2023, Crypto.com shut its venue for institutional traders, blaming limited demand.