Crypto.com sees ‘strong legal footing’ in crypto rulings against SEC

 Previous crypto rulings against the SEC have put Crypto.com on a “strong legal footing” in its lawsuit against the regulator, its chief legal officer Nick Lundgren said.

Crypto.com, a prominent cryptocurrency exchange and service provider, has referenced recent judicial decisions unfavorable to the United States Securities and Exchange Commission (SEC) as potentially beneficial to its ongoing legal dispute with the regulatory body.

On October 8, Kris Marszalek, co-founder and CEO of Crypto.com, revealed that the exchange has initiated legal proceedings against the SEC following a Wells notice issued by the agency.

The firm asserts that the SEC's actions represent "unauthorized and unjust regulation," while expressing optimism that the forthcoming US presidential administration may adopt a "more constructive and effective approach" towards cryptocurrency regulation.

Legal victories inspire optimism  

The cryptocurrency sector has experienced notable legal successes against the SEC in recent years, establishing significant precedents for firms such as Crypto.com.

One notable triumph was achieved by Grayscale Investments, a crypto asset management firm, which secured a favorable ruling against the SEC in August 2024. This legal victory enabled Grayscale to transform its over-the-counter Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin exchange-traded fund (ETF), which commenced trading in January alongside several other spot BTC ETFs.

Another pivotal ruling occurred in July 2023, when a court determined that XRP is not classified as a security when traded on digital asset exchanges, leading to XRP's reinstatement on global exchanges after a series of 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,” Crypto.com’s chief legal officer Nick Lundgren told Cointelegraph on Oct. 17.

He added: 

“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.”

Wells notice doesn’t halt US operations

By definition, the SEC’s Wells notice is a communication informing a company that the regulator has concluded that they should be charged with violating securities laws.

Crypto.com’s receipt of a Wells notice does not mean that the company should halt operations in the US.

“Wells notice is not a final determination that prevents a defendant from continuing its business,” Michael Gold, partner at Securities, Regulatory and Transactional group, told Cointelegraph.

He mentioned that the recipient has the opportunity to respond to the Wells notice with a Wells Submission containing its arguments about why the charges should not be brought against the target. Gold added:

“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.”

Crypto.com’s US presence

Headquartered in Singapore, Crypto.com officially rolled out exchange services in the US in March 2022, initially opening its platform exclusively to select institutional investors.

However, in June 2023, Crypto.com suspended its institutional platform in the US, citing limited demand. The move came shortly after the SEC sued US-based exchange Coinbase over the alleged offering of unregistered securities in the form of tokens like Cardano ADA$0.3478, Solana SOL$154.17 and others. 

While shutting down its institutional offering, Crypto.com allegedly continued offering retail services, according to social media commentary. Some users on reddit claimed that the platform remained “fully operational” in the US for retail users.

Related: SEC’s Ripple appeal doesn’t challenge XRP non-security status

It’s unclear which Crypto.com products and services are currently available to either retail or institutional clients in the US.

On its website, Crypto.com states that it is currently available in 49 US states, as well as US territories. The company maintains a local headquarters in Texas. The list of supported jurisdictions doesn’t include New York, as Crypto.com is working to receive the necessary approvals there:

“We’ll continue to evaluate the steps required to offer our services in New York (our goal) and will provide updates when and if the status in this restricted state changes,” the website reads.

Crypto.com surpassed Coinbase in trading volume in August, reportedly reaching $3.2 billion in daily trading. Crypto.com’s managing director, Giuseppe Giuliani, attributed the growth to stronger market conditions and acquisitions of new institutional clients.