KEY POINTS
- The suit alleges that SEC has been "increasingly aggressive" in its enforcement actions in the past two years
- It argued that Congress has not provided the regulator with "broad authority" over digital assets regulation
- CFAT is an association that advocates for "sensible" crypto and digital asset regulation
Digital assets company Lejilex and non-profit trade association Crypto Freedom Alliance of Texas (CFAT) have filed a complaint against the Securities and Exchange Commission (SEC), challenging the agency's assertion of its regulatory authority over "practically all digital asset transactions" in the state and across the U.S.
In the Wednesday filing at the U.S. District Court's Northern District of Texas (Fort Worth Division), Lejilex and CFAT said the SEC has "brought a series of increasingly aggressive enforcement actions in a service of a campaign of gross regulatory overreach" over the past two years.
"Although multiple SEC Commissioners have recognized for years that Congress has not provided the SEC with broad authority to regulate digital assets – and although Congress has not considered dozens of often bipartisan bills related to digital asset regulation in recent years but enacted none of them – the SEC's recent enforcement actions embrace the novel position that nearly all digital asset transactions involve 'investment contracts' under the federal securities laws," the lawsuit argued.
Instead of respecting Congress-imposed limits to its jurisdiction, the SEC relied on regulation through ad hoc enforcement actions, the complaint noted.
Furthermore, there have been repeated pleas from industry participants for the SEC to provide a definitive regulation to provide clear guidance on how cryptocurrency and digital asset participants should go about with their business, the lawsuit said.
It also revealed that the plaintiffs are a company looking to launch a new virtual asset trading platform, while the other is an association advocating for "sensible digital asset regulation."
The lawsuit aims to "prevent" the SEC from unlawfully charging Lejilex and CFAT members with securities laws violations based solely on the regulator's "fundamentally mistaken view of its regulatory power."
The latest lawsuit comes in the heels of several other complaints and legal actions from industry players against the regulator.
Last week, Blockchain project Debt Box moved to block the agency's bid for the dismissal of SEC's lawsuit against the firm, calling out the SEC's "double standard." The motion to oppose SEC's dismissal attempt came after the agency admitted that it misrepresented some information in a court hearing over its case of supposed illegal fund transfers against Debt Box.
In January, Binance, the world's largest centralized cryptocurrency exchange by trading volume, appealed to a federal court for the dismissal of the SEC's fraud lawsuit against it.
