Crypto startup accuses SEC of ‘massive regulatory land grab’

Crypto startup Lejilex and the United States Securities and Exchange Commission have filed competing briefs for summary judgment in a Texas federal court, escalating their legal battle over the classification of crypto.

Lejilex, part of the Crypto Freedom Alliance of Texas, said in its Oct. 3 brief that it would facilitate crypto transactions, not sell securities, and accused the SEC of overreaching its regulatory power.

“The fact that the SEC perceives digital assets to be different is no justification for its massive regulatory land grab.” 

The Texas-based firm was founded last year and plans to open a crypto exchange by the end of 2024. It is seeking a preemptive ruling that its business won’t violate securities laws.

Lejilex stated that the SEC wants to paint asset sales broadly as security transactions and has clung to the notion that nothing should limit this “transformative expansion of its regulatory power.”

However, the SEC claims that the lawsuit is an attempt to get the court to rule that cryptocurrencies can never count as securities.

The SEC also raised the issue of standing, arguing that Lejilex hasn’t had any agency enforcement action against it.

In February, Lejilex asked the court to rule that listing pre-existing tokens will not violate securities laws. “We wish we were launching our business instead of filing a lawsuit, but here we are,” its co-founder Mike Wawszczak told Reuters.

In an Oct. 4 X post, Coinbase chief legal officer Paul Grewal commented on the briefs, claiming there are inconsistencies in the SEC’s arguments about “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,” he said. The SEC sued Coinbase last year, claiming it sold unregistered securities, which the exchange denies.

“This is our government acting in the name of all of us. Telling one judge one thing while telling another the opposite should not be tolerated. We deserve better,” Grewal said.

Related: Ripple CEO on SEC appeal: ‘We’ll fight in court for as long as we need’

The SEC has been lambasted this week by Ripple executives and lawyers following its appeal against a 2023 court ruling in the ongoing lawsuit that secondary XRP (XRP) sales did not constitute securities. 

“Because the SEC is pursuing an anti-crypto agenda, it will now waste more taxpayer money,” said Republican Senate candidate John Deaton in response to the SEC’s planned appeal.

Magazine: Anti-aging tycoon Bryan Johnson almost devoted his life to crypto