A lawsuit has been filed against the US Securities and Exchange Commission (SEC) in Texas by a consortium of some of the biggest companies in the crypto industry.
This Texas lawsuit comes in response to what the consortium says are ‘erroneous SEC enforcement actions’.
The lawsuit
Crypto exchange Lejilex, which is a startup based in Fort Worth, Texas, and Crypto Freedom Alliance of Texas (CFAT) are leading the lawsuit in question.
They have demanded that judicial clarity be provided over whether the digital asset transactions that are conducted in the state come under the regulatory authority of the SEC or not.
According to the plaintiffs, the securities regulator does not have any such authority, even though it has claimed the contrary several times.
In a press release, CFAT said that the unpredictable and unlawful approach of the SEC has created an environment that has made it difficult for companies like Lejilex to operate without worrying about enforcement action.
Several crypto industry leaders are part of CFAT, which include Coinbase, Blockchain Capital, Paradigm, Ledger, and Andreessen Horowitz’s a16 Crypto division.
The subject
Coinbase is already engaged in a separate lawsuit with the SEC over its failure to register as a securities exchange, despite allegedly listing several securities on its platform.
The same subject has been tackled in the CFAT lawsuit filed in Texas, but instead, it has taken a state-level and preemptive legal fight to the SEC.
According to a legal expert, this is the first time that a participant in the crypto industry is proactively demanding a declaration that secondary market sales cannot be considered securities transactions.
They are also demanding that digital asset trading platforms do not have to register with the SEC. Coinbase is arguing the same principle in federal court in New York.
But, in the case of Lejilex, it functions as a non-custodial and centralized exchange.
The arguments
The arguments that CFAT has made are similar to the ones presented by Coinbase, as they claim that the SEC has used a broad definition of investment contracts under the Howey Test.
The argument says that even transactions that are not securities sales have been categorized as such by the SEC.
Mike Wawszczak, the co-founder of Lejilex, said that they wanted to launch their business instead of filing a lawsuit, but it cannot be helped.
He went on to say that entrepreneurs should not have to worry about fear of rogue enforcement, which they do in the crypto industry.
There has been widespread criticism directed towards the SEC over its approach towards the crypto industry.
This criticism has not only come from participants in the crypto industry but also from Congress and even from within the SEC itself.
In the last year, the cases the agency filed against crypto companies like Grayscale and Ripple collapsed and analysts believe that its lawsuit against Coinbase might also be dismissed.
The week also saw one of the top lawyers of the SEC’s crypto unit leave the agency for a job in the private sector that could see her support the crypto industry.