The SEC of Gary Gensler sued in Texas for cryptocurrencies

In Texas, Gary Gensler’s SEC has been sued by a crypto association. 

The association is called Crypto Freedom Alliance of Texas (CFAT), and the complaint was filed in collaboration with a company that deals with digital assets, Lejilex. 

The official statement from the two complainants reveals that the complaint was filed for the alleged unlawful targeting by the SEC of the digital asset industry.

Crypto news: Texas lawsuit against SEC by Gary Gensler

Lejilex and CFAT have reported the Securities and Exchange Commission of the USA to challenge their alleged unlawful claim that the agency has regulatory authority over virtually all digital asset transactions in Texas and the United States. 

They believe that the SEC has usurped almost total jurisdiction over the digital asset sector, despite several commissioners of the SEC themselves acknowledging that Congress has never granted the agency the authority to do so.

The complaint was filed in anticipation of the launch of a new digital asset trading platform by the Texan company Lejilex, which has requested support from the CFAT.

The goal is to have a court certify that transactions of digital assets are not to be considered sales of securities subject to SEC registration requirements. 

In the event that Lejilex and CFAT were to win this case against the SEC, it would put an end to the SEC’s battle against unregistered cryptocurrency securities.

The complaint is filed with the United States District Court for the Northern District of Texas.

The central issue

According to the complainants, the SEC not only does not have the legal authority to regulate most digital asset transactions, but has also shown itself to be unprepared to respect the limits that Congress has placed on its jurisdiction. Furthermore, they even argue that it would not have been able to develop and implement common sense and consistent regulations for this emerging sector. 

Something vaguely similar had also been contested in the past by Coinbase, which had sued the SEC for not being able to provide them with clear information on which regulations had to be respected, and especially on what they should have done concretely to avoid not respecting them. 

After what happened to Coinbase, which was in turn reported by the SEC for allowing the exchange of unregistered securities, it is more than logical that a new crypto exchange, in order to avoid problems, takes precautions by bringing the SEC to court to understand if it is right or not. 

Lejilex states that the SEC’s approach, defined as “illegal and unpredictable”, has created an environment in which crypto exchanges are unable to operate without the fear of being subject to enforcement (and punitive) actions by the agency, leaving a trillion-dollar industry and law-abiding individuals in a state of uncertainty.

The risk is that the SEC may end up unilaterally taking control of this industry without respecting its clear statutory mandate that prevents such a massive expansion of its power. 

Furthermore, the SEC believes that practically all digital assets, or almost all, qualify as securities under their jurisdiction, while exchanges argue that crypto transactions are not unregistered security transactions. 

The complainants

Lejilex is a for-profit company based in Texas that has developed a new platform for the exchange of digital assets called Legit.Exchange.

This is a non-custodial platform, so different from the usual centralized exchanges, that allows users to trade digital assets. We are actively participating in the growth of the crypto community in Texas through our relationship with the Crypto Freedom Alliance of Texas.

CFAT is a non-profit trade association based in Texas that supports the responsible development of policies on digital assets in Texas to promote innovation and economic growth, while also protecting consumers. 

They believe that blockchain technology paves the way for the next generation of the Internet and that Texas has a lot to gain from being a leader in digital asset policy. 

CFAT includes several important members in the sector, including Coinbase, Ledger, Paradigm, Blockchain Capital, and a16z Crypto. 

The co-founder of Lejilex, Mike Wawszczak, stated:

“We would like to launch our business instead of starting a lawsuit, but here we are.”

The SEC’s actions against our industry have paralyzed those of us who just want to create legal businesses and technologies.

The fear of an abusive application of the rules should not be something that entrepreneurs are forced to experience.

We hope that our action encourages the SEC to reconsider its regulatory approach and we invite them to work with us and our industry to ensure that the most important technologies of the future are built here in America, according to American laws, in line with American values.”