Crypto Startup Lejilex Accuses SEC of Overreaching Its Regulatory Authority
Crypto startup Lejilex escalated its case with the US SEC in a new brief, accusing the regulator of overreaching its regulatory power.
In its latest brief, Lejilex described the SEC’s multiple enforcement actions and approach to digital assets as a “massive regulatory land grab.”
The latest development is part of the crypto trading firm’s charge against the SEC in a lawsuit that began on February 21.
Lejilex Slams SEC Over Its Massive Regulatory Land Grab
The Securities and Exchanges Commission (SEC) and Texas-based crypto trading platform Lejilex have been battling over the regulatory classification of cryptocurrencies. Both parties recently filed counter briefs for summary judgment in the lawsuit.
In its brief filed on October 3, Lejilex said it plans to facilitate cryptocurrency transactions, not sell securities. The firm accused the Securities and Exchanges Commission of overstepping its jurisdiction on digital asset regulations.
Founded in 2023, the Texas-based crypto trading firm intends to launch a crypto exchange by 2024 end. It requested a preemptive ruling before the exchange’s opening, stating that its operations wouldn’t violate securities laws.
The firm argues that the SEC wants to classify all crypto asset sales as securities transactions. It noted that the commission believes nothing should prevent it from exerting its regulatory power over crypto.
Conversely, the SEC claims Lejilex’s lawsuit aims to make the court rule that crypto assets are not securities. The agency also argued that there hasn’t been any enforcement action against the crypto firm.
In February, Lejilex sued the SEC, requesting a ruling that listing already existing tokens does not violate securities laws.
The company’s co-founder, Mike Wawszczak, said, “We wish we were launching our business instead of filing a lawsuit, but here we are.”
SEC Arguments Are Inconsistent, Coinbase’s Grewal Says
Coinbase CLO Paul Grewal commenting on the briefs in an X post. The legal officer claimed the SEC’s argument that the nature of an asset does not determine whether transactions involving it are securities transactions are inconsistent.
Yesterday @SECGov filed a reply brief in the @LEJILEX case that argued “whether a digital-asset transaction is a securities transaction is not determined by the nature of the asset.” It’s remarkable because they argued the precise opposite to Judge Failla in our case. 1/3
— paulgrewal.eth (@iampaulgrewal) October 3, 2024
Grewal said it’s surprising because the SEC argued the opposite before Judge Failla in its case against Coinbase. Notably, the SEC sued Coinbase last year, accusing it of selling unregistered securities and operating as an illegal broker and clearing house.
Coinbase has denied all allegations, calling out the SEC for failing to provide clear regulatory guidelines for crypto firms.
In his X post, Grewal slammed the SEC for playing two faces, telling one Judge one thing and another a different story. He noted that such behavior should not be condoned. “We deserve better,” said Grewal.
Meanwhile, the SEC has remained adamant in its enforcement approach to crypto. The regulator has appealed the court’s decision in its long-running legal battle with Ripple, the issuer of the XRP token.
🚨BREAKING: The @SECGov has filed a notice of appeal in the @Ripple case. https://t.co/jbLJaCmgNt
— Eleanor Terrett (@EleanorTerrett) October 2, 2024
The SEC refused to accept that Ripple’s XRP sales on the secondary market do not constitute securities. Ripple executives have condemned this move, describing it as misguided and infuriating.
If Gensler and the SEC were rational, they would have moved on from this case long ago. It certainly hasn’t protected investors and instead has damaged the credibility and reputation of the SEC.
Somehow, they still haven’t gotten the message: they lost on everything that… https://t.co/1hW7xVSL9b
— Brad Garlinghouse (@bgarlinghouse) October 2, 2024
Republican Senate candidate and pro-XRP lawyer slammed the SEC for wasting taxpayers’ money to pursue an anti-crypto agenda.
Normally, a Candidate for U.S. Senate would probably not comment on the @SECGov’s decision to appeal a District Court ruling. However, I’m not your typical Candidate and I spent hundreds of pro bono hours and over $75K of my own money, fighting gross overreach and misconduct at… https://t.co/SNlxoy8tpW
— John E Deaton (@JohnEDeaton1) October 2, 2024
