InfoBytes Blog
Crypto exchange files complaint against SEC for “de facto” rule
On October 8, a crypto exchange company filed a complaint against the SEC in the U.S. District Court for the Eastern Division of Texas, Tyler Division, seeking declaratory and injunctive relief to prevent the SEC from expanding its jurisdiction to cover secondary-market sales of certain network tokens sold on the plaintiff’s platform. The complaint alleges that the SEC is unlawfully asserting jurisdiction over these sales, which the plaintiff claims are not securities under the Securities Act of 1933 or the Securities Exchange Act of 1934. The SEC is accused of creating an “unlawful de facto rule” that nearly all network tokens are “Crypto Asset Securities,” subject to its regulation, without statutory authority or formal rulemaking. The complaint lists specific network tokens, including SOL, ADA, BNB, FIL, FLOW, ICP, ATOM, ALGO, NEAR, and DASH, which the plaintiff asserts are not securities and are functionally similar to Bitcoin and Ether, which the SEC has previously stated are not securities.
The SEC is further accused of using enforcement actions to introduce “novel legal and regulatory theories,” rather than participating in formal rulemaking processes, which the plaintiff claims is inconsistent with federal law, exceeds the SEC’s statutory authority, and violates the Administrative Procedure Act (APA). The complaint also noted that the SEC has issued a Wells notice to the plaintiff, indicating an imminent enforcement action based on alleged violations related to the secondary-market sales of network tokens, which the plaintiff argues would have significant legal and financial consequences. The plaintiff seeks a declaration that the targeted network tokens are not securities and that it does not operate as an unregistered securities broker-dealer or clearing agency.
Additionally, the complaint requests that the court set aside the SEC’s de facto rule and permanently enjoin the SEC from enforcing it against the plaintiff, arguing that the SEC’s actions are arbitrary, capricious, and exceed its statutory authority under the Securities Act and the Exchange Act, and that the SEC has failed to follow the APA’s notice-and-comment rulemaking requirements.