Cryptocurrency exchange Bittrex seeks dismissal against the United States Securities and Exchange Commission (SEC) by submitting a motion to dismiss in their ongoing legal dispute. In their recent court filing, Bittrex argues that the SEC lacks the authority to regulate cryptocurrencies as securities unless explicitly granted by Congress.
This bold assertion challenges the SEC’s interpretation of existing securities regulations. It also aims to establish a clear regulatory framework for digital assets.
Alignment with Coinbase
Bittrex’s motion to dismiss closely mirrors the approach taken by Coinbase, a larger cryptocurrency exchange. By aligning their arguments with Coinbase’s legal framework, Bittrex aims to leverage the robust defense strategy established by Coinbase. This strategic move demonstrates Bittrex’s intent to strengthen their position against the SEC’s allegations.
Both Bittrex and Coinbase’s legal teams identify what they perceive as shortcomings in the SEC’s allegations regarding the trading of investment contracts. They acknowledged that the initial sale of certain crypto assets could be classified as securities contracts. However, both defendants assert that such classification does not extend to assets traded on secondary markets.
Their argument is based on the belief that once an asset is launched and actively traded on secondary markets, it should be considered a commodity or another class of digital asset rather than a security.
Questioning the SEC’s Communication
Bittrex further contends that the SEC failed to adequately communicate that its actions were prohibited. This highlighted a defense strategy commonly employed by crypto defendants who challenge the SEC’s allegations.
By raising this point, Bittrex seeks to question the SEC’s handling of the situation and potentially undermine the credibility of the allegations made against them.
The SEC’s Charges Against Bittrex
In April, the SEC charged Bittrex and its co-founder, William Shihara, with operating an unregistered national securities exchange. The complaint alleges that Bittrex facilitated the trading of digital assets that met the securities criteria outlined in U.S. federal securities laws without obtaining SEC registration as an exchange.
Additionally, the SEC charged Bittrex Global, the foreign affiliate of Bittrex, with failing to register as a national securities exchange.