A lawsuit has been filed against the Securities and Exchange Commission challenging the agency’s authority to regulate digital assets, according to a Block works report.
The suit was filed last month in U.S. District Court for the Northern District of Texas by Fort Worth-based crypto company Lejilex and lobbying group Crypto Freedom Alliance of Texas (CFAT). It accuses the SEC of “gross overreach” in its regulation of the crypto industry.
Lejilex aims to operate a cryptocurrency platform known as Legit.Exchange and plans to list digital assets including those the SEC has labeled as securities in its lawsuits against crypto companies Coinbase and Binance.
Lejilex alleges that the SEC lacks a “clear statutory mandate” to oversee the cryptocurrency industry and seeks judicial clarification that listing pre-existing tokens on their platform would not infringe securities laws.
“We wish we were launching our business instead of filing a lawsuit, but here we are,” stated Mike Wawszczak, the Co-Founder of Lejilex.
The plaintiffs claim that the SEC is wrong to classify digital assets as “investment contracts” because they create no ongoing commitment by the creator to manage any common venture for the benefit of the buyer.
“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 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 suit argues.
CFAT is asking the court to block the SEC from suing its members and says it is advocating for the “responsible development” of crypto policies in Texas. The authority said the SEC’s actions are impeding other authorities who may have jurisdiction over digital assets.
The lawsuit goes on to allege that the SEC has not set out a definitive regulation to provide clear guidance on how cryptocurrency and digital asset participants should be conducting their businesses.
A spokesperson for the SEC declined comment on the lawsuit.
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