Crypto.com CEO Kris Marszalek Sues the SEC After Receiving Wells Notice

The development began on the morning of October 8, when the SEC sent a Wells notice to Crypto.com. A Wells notice is a declaration from the SEC that its investigation of a company is over, and that it seeks to prosecute it.

Crypto.com has filed a preemptive lawsuit against the U.S. Securities and Exchange Commission (SEC) following a Wells notice signaling future prosecution. The SEC is reportedly seeking to classify most crypto transactions as securities transactions, greatly tightening restrictions on the industry.

This development began on the morning of October 8, when the SEC sent a Wells notice to Crypto.com. In response, Crypto.com CEO Kris Marszalek announced that the exchange would preemptively sue the SEC.

“This unprecedented action by our company against a federal agency is a warranted response to the SEC’s regulation by enforcement regime which has hurt more than 50 million American crypto holders. The SEC’s unauthorized overreach and unlawful rulemaking regarding crypto must stop,” Marszalek stated.

Crypto.com's official statement regarding this lawsuit was direct and bellicose. It claimed that improper attacks from the SEC are “part of the process” of running a legitimate exchange, and that regulator actions against the industry left Crypto.com with “no other choice.” It even added that this prosecution goes against the growing bipartisan pro-crypto consensus in government.

In short, Marszalek and Crypto.com have depicted the SEC's impending lawsuit as wholly illegitimate. They claim that the SEC is seeking to consider nearly every crypto asset transaction a securities transaction, minus Bitcoin and ETH. The firm even filed a petition to the SEC and the Commodity Futures Trading Commission (CFTC) to explicitly state that some crypto assets are in fact commodities.

This preemptive strike mirrors a similar action from Consensys this April. In response to the threat of impending prosecution, Consensys also launched a lawsuit against the SEC, over the same concern about securities transactions. That lawsuit was dismissed in late September, and there has been no satisfying answer to any of these questions.

Essentially, Marszalek may have a point in describing this suit as an act to “protect the future of crypto.” Commodity regulations are looser than securities, and that's a big part of why BTC and ETH are considered commodities. However, if every single other asset is held to a higher standard, it would have dramatic effects on the entire industry.

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