Written by Judy Godoy
(Reuters) – A Texas cryptocurrency company and an industry group filed a lawsuit against the U.S. Securities and Exchange Commission on Wednesday, saying the regulator exceeded its authority and asking a judge to rule that digital assets traded on exchanges are not securities.
Fort Worth-based cryptocurrency company Lejilex and lobbying group Crypto Freedom Alliance of Texas (CFAT) claim that the SEC has asserted jurisdiction over the industry without “clear legal authority.”
Lejilex says it seeks to operate a cryptocurrency platform called Legit.Exchange. The company, which was founded last year, said it plans to list digital assets including those deemed securities by the SEC in lawsuits filed against Coinbase, the largest cryptocurrency exchange in the United States, and Binance, the world's largest cryptocurrency exchange.
Lejilex wants the court to rule that listing the pre-existing tokens would not violate securities laws.
Both Coinbase and Binance have denied the SEC's allegations.
The CFAT asked the court to block the SEC from suing its members, saying the agency's assertion of jurisdiction over digital assets made it difficult to convince Texas lawmakers to adopt “reasonable policies.”
The group was launched last year and includes Coinbase and venture capital firm Andreessen Horowitz's cryptocurrency fund a16z as members.
CFAT and Lejilex argue that the SEC is wrong to classify digital assets as “investment contracts” because they do not create any ongoing obligation between creator and purchaser.
They also asked the court to apply the “big questions” doctrine, which allows judges to invalidate executive agency actions of “broad economic and political significance” unless Congress clearly authorizes them.
This once-rare principle has gained a lot of traction among regulatory opponents, with the conservative-leaning US Supreme Court applying it in two recent cases.
Cryptocurrency companies fighting the SEC's enforcement actions, including Coinbase and Binance, have made the same arguments in other cases, so far without success.
A judge in July rejected the argument that continuing commitment is required to make an asset a security in the SEC case against Ripple Labs. Another judge overseeing the regulator's lawsuit against Terraform Labs found that the “key questions” doctrine does not apply to the cryptocurrency industry. Both cases were filed in New York.
The new lawsuit filed in federal court in Fort Worth puts the industry's battle with the regulator under the jurisdiction of the 5th U.S. Circuit Court of Appeals. More than two-thirds of the appeals court's judges were appointed by Republican presidents, making it the preferred venue for appeals to the SEC under the Biden administration.
(Reporting by Judy Godoy in New York; Editing by Andrea Ricci)
