As a seasoned analyst with over two decades of experience in the financial industry, I find myself intrigued by the latest developments at Crypto.com and their legal battle against the SEC. Having witnessed numerous regulatory battles between traditional financial institutions and regulators, I can’t help but draw parallels and see some promising signs for Crypto.com.
crypto.com, a platform for buying and selling cryptocurrencies, believes that recent judicial decisions against the U.S. Securities and Exchange Commission (SEC) might strengthen their case in their ongoing legal dispute with the regulatory body.
On October 8th, Kris Marszalek, the co-founder and CEO of Crypto.com, declared that they had initiated a legal action against the Securities and Exchange Commission (SEC) as a result of receiving a Wells notice from the regulatory body.
The firm argues that the SEC’s actions are “unwarranted and unfair regulation,” suggesting that the incoming U.S. administration might adopt a “more cooperative and efficient strategy” towards cryptocurrencies.
Legal rulings offer hope
In recent times, the digital currency sector has scored notable court successes against the Securities and Exchange Commission (SEC), establishing crucial benchmarks for businesses such as Crypto.com.
In August 2024, the crypto asset manager Grayscale Investments secured a court victory against the SEC. This legal triumph enabled Grayscale to transform its over-the-counter Grayscale Bitcoin Trust (GBTC) into a standard Bitcoin (BTC) exchange-traded fund (ETF), and trading for this ETF began in January, coinciding with approximately a dozen other spot BTC ETFs.
In the summer of 2023, I was thrilled to witness a significant court ruling that classified XRP (XRP) as not being a security when it is traded on digital asset exchanges. This decision marked a turning point for XRP, allowing it to re-enter global markets following multiple delistings. As a researcher, understanding and analyzing the implications of such rulings is an integral part of my work.
In simpler terms, Nick Lundgren, the legal head of Crypto.com, expressed relief to CryptoMoon on October 17th as US Courts have clarified that cryptocurrencies do not fall under the Securities and Exchange Commission’s (SEC) regulatory oversight for being securities themselves. This has been a long-held belief in the crypto industry.
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
According to its meaning, a Wells notice is a message sent by the Securities and Exchange Commission (SEC) to indicate that they believe a company has potentially broken the rules concerning securities laws.
Receiving a Wells notice from regulatory authorities doesn’t necessarily imply that Crypto.com should cease its U.S. operations. This notice is usually a warning or inquiry about potential issues, allowing the company to respond and address concerns before any further action is taken.
As an analyst, I can clarify that a Wells Notice doesn’t necessarily mean the end of a company’s operations, as Michael Gold, partner at the Securities, Regulatory and Transactional group, explained to CryptoMoon. The notice is simply a preliminary step in the regulatory process, not a definitive halt to business activities.
gold pointed out that the person being addressed can submit a Wells Submission, which is their chance to present reasons explaining why accusations should not be made against the subject, in response to the Wells notice.
“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
Based in Singapore, Crypto.com began offering exchange services in the United States in March 2022, first making its platform available only to a limited number of institutional investors at the outset.
In June 2023, Crypto.com halted its institutional service within the U.S., stating a low demand as the reason. This decision was made following closely on the heels of the SEC filing a lawsuit against American crypto exchange Coinbase, accusing them of selling unregistered securities in the form of tokens such as Cardano (ADA) and Solana (SOL), among others.
Despite suspending its institutional operations, it was reportedly suggested through social media comments that Crypto.com kept providing retail services. Users on Reddit asserted that the platform stayed active and fully functional for individual users based in the U.S.
It’s not clear which Crypto.com offerings and solutions are presently accessible for both individual and institutional investors based in the United States.
On their website, Crypto.com specifies that its services are accessible in 49 U.S. states and territories, except for New York. The company operates a regional headquarters based in Texas. They are actively seeking the required permissions to offer their services in New York.
“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.
In August, it was reported that Crypto.com outpaced Coinbase in daily trading volume, with a staggering $3.2 billion traded each day. This impressive increase was largely credited to improved market circumstances and the addition of new institutional clients by Crypto.com’s managing director, Giuseppe Giuliani.
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2024-10-18 16:11