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Last week, Coinbase submitted a request to dismiss the allegations made against it by the SEC. In support of its stance, the exchange claimed that the agency is overstepping its boundaries, asserting that crypto assets might not even fall within their jurisdiction.
The prominent US crypto exchange further accused the SEC of disregarding previous approvals granted for the sale of certain digital assets mentioned in its lawsuit.
Inspired by Coinbase’s action, Bittrex has opted to take similar steps.
Lawsuits and Bankruptcies
Although Bittrex is also facing legal proceedings related to bankruptcy, the motion to dismiss charges pertains to a separate lawsuit, which was filed shortly after the company chose to exit the US market. At that time, it had already been under investigation since 2017 and had engaged in unproductive discussions with the SEC since 2022.
Ultimately, a Wells notice was issued, followed by a comprehensive lawsuit against Bittrex for listing unregistered securities. However, the company has now countered the SEC’s claims, asserting that the crypto assets involved in the lawsuit are not securities at all.
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Publicly Traded Crypto Assets Misclassified as Securities
As per court filings, Bittrex contended that while crypto assets may be regarded as securities at their inception, their classification changes once they are traded on secondary markets. Therefore, these crypto assets should be categorized as commodities.
“Tokens are not a new kind of security; they are fundamentally different from anything the Commission has ever deemed a security. They resemble commodities or property far more than the “investments” that were the focus of “Congress’ purpose in enacting the securities laws.”
Additionally, Bittrex’s legal representatives argued that even if the court were to determine that these crypto assets do qualify as securities, the SEC lacks the authority to regulate them since US Congress has not granted the agency such power.
Bittrex’s legal team has compared the SEC’s attempts to regulate crypto assets to the FDA’s efforts to control tobacco or the EPA’s initiative to regulate greenhouse gases, both viewed as overreach by government agencies.
In conclusion, Bittrex’s legal counsel also referenced a 2021 statement by Gary Gensler, in which he acknowledged to Congress that the SEC does not possess a legal framework for cryptocurrencies.
Whether Coinbase and Bittrex will find success with these efforts remains uncertain – however, they clearly reflect the increasing dissatisfaction with the SEC’s impulsive regulatory actions, which seem to favor litigation over constructive engagement with crypto platforms.
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